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Section: 4 Deciding what Level of Risk to take
How much risk you are willing and able to absorb? The answer differs from investor to investor. However, certain risks cannot be avoided i.e. risks that are beyond the control of the investor.
For instance, market risk is the possibility that financial markets will drop in value and so will the value of your portfolio. On the other hand, certain risks can be minimized or eliminated using a diversification strategy. Portfolio diversification is elaborated in more detail in the next chapter.