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Any time you invest your money expecting a return there’s bound to be risks. If you need an example, just take a look at your house. In general, an asset like your home is considered a fairly safe investment. But if you purchased a property before the bubble burst on the housing market a few years ago you’ve likely had to rethink that strategy. Of course, the wonderful thing about a house is that even if it depreciates, you can keep making your payments, do a few upgrades, and wait for the market to recover and you’re likely to see your investment rebound over time. The same cannot be said of all types of investing. So if you’re looking for ways to measure the relative risk that various portions of your portfolio entail, here are just a few tips to help you figure out whether or not your investments are apt to pay off in the long run.

One way to measure risk in your investments is to look at how well they’ve performed in the past. This isn’t a surefire way to pinpoint future rates of return, but it should give you a clue as to the stability of a particular option. For example, before you invest in any stock, bond, or fund you should consider both the chance of loss and the amount. All investments will fluctuate, meaning that sometimes they earn and sometimes they lose. If you’re looking to mitigate risk you’ll obviously want to seek out options that enjoy a higher percentage of the former. But you also need to consider the extent of loss that occurs. If a particular stock performs well on average but suffers major losses during the times that it does fail, then it’s probably best avoided.

Of course, you should also pay attention to industry risk ratings like the standard deviation method, which tells you how much your investment is likely to stray from the average returns. Suppose, for example, you’re interested in a stock that offers a return of 8% on average. If it comes with a standard deviation of 2%, that means it is likely to earn as little as 6% or as much as 10% in any given month. If you find this to be an acceptable risk, then you may be willing to add this option to your portfolio. You might also consider beta ratios, which help to measure the risk of any given investment against a benchmark within their particular market.

In truth, there are all kinds of tools used to measure risk for the wide variety of investment options out there as a way to help both industry insiders (brokers and such) and individual investors determine whether or not they are comfortable with the components they’ve chosen for their portfolio. Often, your broker can help you to understand these tools and how they apply to your investments. You may not be keen to tackle self managed super funds with the risk assessment options at your disposal, but the ability to manage simple risk measurement should be enough to help you make more informed decisions at the very least.