Which strategy focuses on reducing the chance of loss by setting rules and controls?

• A. Yield
• B. Long-Term Investing
• C. Pay Yourself First
• D. Risk Management

Answer: (D)

Risk management is about reducing the chance of loss by setting rules and controls. In investing, this means putting guardrails in place to limit how much you can lose and how much risk your portfolio carries. Examples include diversifying across different asset classes and regions, keeping position sizes small enough so no single investment dominates, periodically rebalancing to maintain your target risk level, and using tools like stop-loss orders or hedging techniques to cap downside. These practices protect your capital and keep your investments aligned with your risk tolerance and long-term goals. Yield describes the income an investment pays, not the process of limiting risk. Long-term investing refers to a time horizon, not the risk controls. Pay Yourself First is a budgeting habit aimed at saving, not risk management.