High risk is associated with high returns. Generally it is true, but the results are only perceivable in long term. To get rich, the first step is to identify how much one can really afford to lose or what is known as value at risk. The next step is to examine whether existing investment portfolio already has similar investments. This is correlation. If there are such investments in existing portfolio, then the risk increases, even if the specific class of investment is moving up. It is naive to believe that a particular sector will remain northbound forever. The last step is to assess the impact of a news item from historic data. Based on this, the ratio of deviation from standard price of the stock may be ascertained; this is known as standard deviation in mathematics. These are the most commonly used methods for mitigating risks, and increasing wealth.
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