Wealth can mean different things for many people, and the word can be applied in many contexts. For an investor, wealth becomes an objective – a primary financial goal. To accumulate capital in their portfolio and to invest and grow the amount of expendable income, becomes a priority when managing investments. The measure of someone’s wealth extends to the total assets owned and can include real estate, funds, liquid assets, as well as other forms of investments.

How a person measures or calculates their wealth is important, and a method should be developed. It will directly affect their approach to investing, and the financial strategies used. How a person manages risk when investing is also an important factor, even more so than the returns.

There are many strategies to manage risk. Risk will be different for every investor, as will the amount of risk that an investor will be able to tolerate. For an aggressive investor, the willingness to accept high risk is different from a very conservative investor.

Individual risk is related to an investor’s personal wealth – the amount of money that he or she can afford to lose and for how long. It is also related to how much that particular investor needs to earn and within what time frame.

Managing individual risk depends on how much money can be invested, at a comfortable pace for the investor. It also takes into consideration how much time the investor has, for example as in the case of retirement. Factors such as the number of years until retirement and the rate at which the investment grows, will determine the type of investment and risk taken.

Market risk is another factor to consider when managing risk. This is the typical risk associated within a specific market. For examples, stocks dive and real state bubbles. The ability of an investor to survive these conditions in the market, should determine how they approach it with their portfolio – if they enter it at all.

Money should be invested in a variety of areas to assist in avoiding losses. To manage market risk, investors should consider staying within markets that they are familiar with. Investors who understand risk, the markets, and their expectations in time, are able to develop a well diversified investment portfolio.

Risk can be managed by building a cushion to minimize it, or by ignoring it. The most valuable way you can manage your investment risk is by educating yourself on what you are intending to become involved in. Knowledge is power, and power is money.