Three types of risk

Risk of loss. When you buy something and sell it at a lower value you have incurred a loss.
Fluctuation risk. Change in the values of investments while held is also a risk. Handling daily changes in stock and bond values can be stressful.
Inflation risk. The rate of inflation, which hit double digits in 1979 and 1980, has declined since then and has recently been about 3%. While not large, at a 3% inflation rate an item that cost $100 in 2002 will cost almost $116 in 2007 and $134 in 2012.

Dealing with risk

Use common sense. "When something appears too good to be true, it probably is." Others have opinions of how you should handle your finances. But, you will live with the consequences. Don't believe everything you hear and read. Find a qualified financial advisor you can trust.
Diversification. "Don't put all your eggs in one basket." Spreading your assets into the appropriate categories of equity, fixed income and cash investments can reduce your overall risk and provide a logical guide based on your time-horizons and risk tolerance.
Long-term perspective. "Most people don't plan to fail, they fail to plan." Establish your objectives and follow a strategy to reach them.

As you map your overall financial strategy, make sure the combination of risks in your business, your job and your personal finances are appropriately balanced with the potential for overall return.