It seems that changes in the financial markets happen more often, and that market swings are larger than they were a few years ago. Risk is the term often associated with changes in values of stock prices and interest rates. But, there are also other types of risk. Understanding various risks can help you determine the saving and investment strategies that are right for you.

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 today's $100 item will cost almost $116 in 2005 and $134 in 2010.

To deal with these types of risks:

• Use common sense: 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.
• Diversify: 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.
• Think long-term: Establish your objectives and follow a strategy to reach them.