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How to Reduce Risk
The best way to reduce your risk is with a balanced portfolio. Rather than placing "all of your eggs in one basket," diversify your investments. The key to a balanced portfolio is acquiring the right combination of assets. This is where a professional financial planner can help.
Another way to reduce risk is to invest for the long term. Historically, the market has always risen, despite day to day fluctuations and periodic "corrections." Investing for the long term lets you take the slightly higher risks you need to beat inflation and earn a higher return.
With Dollar-Cost Averaging, you invest exactly the same amount every week, month, quarter or year, regardless of the market. This gets you into the investment habit. You build your build investment steadily, without putting too much or too little at the wrong time. Because the market has grown approximately 10% annually, this type of investing averages out the highs and lows of the market and you usually end up paying less per share.
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