Risk and investment go hand in-hand. At the extremes it's easy enough to identify risk, but risk is personal. A person's attitude to risk is determined by huge cocktail of factors which leads to an endless combination of potential risk profiles.

In order to simplify this matrix and help investors, investments can be labelled as 'cautious', 'balanced', 'growth' and 'high risk'. There are numerous variations and the view on what fits into these categories is highly subjective, but you do have to start somewhere.

Cash is the lowest risk. Next are fixed interest investments, such as government gilts and then equities. Fixed interest is generally considered lower risk than equities because you are investing in, or to put it another way, providing loans to, companies or the government. In addition, fixed interest investments pay a regular and known income, and this is a key attraction of these investments. But again, within the fixed interest market there is a wide range of investment opportunities and with this comes a diverse range of risks.

The range of risk in equities is equally huge. To reduce this risk, open ended investment companies (OEICs) hold anywhere between 25 and perhaps 500 companies to spread the risk. But it shouldn't be forgotten that an OEIC invested in, for example, 200 UK shares will rise and fall in value very much in-line with the market. Investors are unlikely to lose all of their money in a downturn, but they will need to sit the downturn out until prices recover.

As to what investment mix suits an individual, it is best decided by working with an investment manager. They can go into depth about your attitudes towards risk, your capacity for financial loss, your experience of investing and your financial goals to make a recommendation of a portfolio structure that meets all of these criteria.