• Loss avoidance: A capital preservation approach means you want to preserve the money you have in your portfolio and take little extra risk. If this is your position, it's important to remember that certain investments offer limited growth opportunities — they're low-risk, low-reward investments.
• Medium risk: If you have slightly more of an appetite for risk, you may look for an asset allocation that represents a medium amount of risk, including the potential for moderate capital losses. This type of allocation could net you regular income from interest and dividend earnings.
• Growth: A growth mindset is one that accepts risk through instruments with a higher risk profile. The more risk you assume, the greater your potential to accumulate wealth. Long-term growth should outweigh short-term losses because they have the best chance of appreciably growing over time, but you can also lose more money using this strategy as well.

It refers to implementing specific techniques to balance risk in a portfolio. You might divide assets into categories, such as bonds, stocks and real estate.

Each type of investment "behaves" differently, so any downturns in one asset may be overcome by the success of a...