Here's a checklist of some key risks facing the investor and an outline of what they may do to recognise and, to some extent at least, mitigate them.

A risk often featured in investment advice is that investment returns are volatile through time, reported The Australian.

Volatility is an integral part of all investing. Investors seeking higher returns through time generally need to accept an increased level of volatility in their year-by-year investment returns.

An investor focusing on the downside risks may start by looking at how investment returns on the main asset classes have performed during different timeframes (say one, three, five and 10-year periods).

This gives the investor some feel for how likely it will be for that asset class (or selected combinations of those asset classes) to record a loss during each of those timeframes. It turns out that even low-risk/return portfolios have suffered losses through periods as short as three years.

Also, the longer the holding period for the investments, the less likely there are setbacks and the more predictable are the investment returns. And higher-risk/return portfolios experience difficult times every now and then but also achieve higher overall outcomes through time.

With this information, investors are better prepared for the negative returns they'll likely experience at various times. And investors have a better appreciation of the need for patience, especially if they have funds in the higher-risk/return asset classes of shares and property.

The historical data makes it clear how important it is for investors not to over-react to losses during short periods.

Investors with a low tolerance for risk need to plan a long holding period for investments in shares or listed property; or look to assets that are lower risk (and that, through time, pay a lower return).

The risk of losing money is greatest when investments are made at or near the top of the investment cycle and then a sharp downturn or, worse, a financial crisis comes along and the investor has to sell quality assets at distressed prices. Investors need to be aware that financial crises will recur in the future just as they have in the past (think 2008, 2001, 1994, 1987, 1981, 1974, 1952 . . .).

It can be dangerous to invest when investors generally are in a euphoric mood, paying high prices for assets. And it makes sense, in the good times, for investors in shares and property to build up a core of safe assets to draw on during the next financial crisis.

Investors also face inflation risk.

With inflation, the real returns investors receive on most of their investments are generally less than the nominal returns; some investments may even go backwards in real terms. Inflation also has wider and complex effects on the nominal returns on investment because it affects the economy and interest rates.

Some other risks of investment, such as being caught with an excessive level of debt or with investments that are too complex and opaque, can be avoided through discipline and common sense on the investor's part.

Yes, the risks are many, but so are the returns when investors exercise care, take good advice . . . and are patient.

Don Stammer chairs Premium Limited and the advisory council of FIIG Securities and is an adviser to the Third Link Growth Fund.

The views expressed are not attributable to any of the organisations with which he is associated.

This week's column draws heavily on a conversation with Ashley Owen, director of Third Link Investment Managers and chair of portfolio construction for Centric Wealth.

Read more about investment risks at The Australian.