Answer:
It's both natural and healthy to be afraid of risk. But in life, there are always certain risks we need to take, whether it's taking a new job, getting married, or any number of daily activities. It's impossible to cut risk out completely. But without risk, there would be no reward, and it's exactly the same for investments.

When it comes to investment, the level of risk you take is proportionate to the reward you gain. Nothing is completely safe. Even a bank could go under and you could lose your money. It's unlikely, but this is exactly what happened in Argentina a few years ago and during the Great Depression. Because this risk is very small, the interest you earn on bank accounts is also very small.

Think about inflation

You also need to think about inflation. In order for your investment to make a real return, it has to grow at a level greater than inflation. Bank accounts don't usually offer inflation-beating returns. To get a real return, you need to invest in the stock market, in property, bonds, or money market. If you only ever put money in a bank account, you'll find it's worth less in the end because inflation has actually eroded its value.

Levels of risk

There are different levels of risk in all asset classes. It's perfectly possible to be invested in the stock market and be extremely conservative. Shares aren't necessarily "risky", as the level of risk depends on the company you buy into. Some companies, like Anglo American, Remgro, and others, have an excellent credit rating and have delivered good returns for decades. They also have the share price to show for it.

Other companies may be much newer and still starting out. They have the potential to grow into another Anglo American and may deliver good returns along the way. But on the other hand they might not. The trick is to pick the companies you know will be winners, and the only way to do that is through knowledge.

Minimising risk

Use your fear of risk to minimise it. Before you take out an investment, study it. It's your money after all. Get a second opinion. Try and understand why the product is being recommended to you. Find out what kind of returns you should be aiming at. If you buy unit trusts, look at the track record of the fund manager. Take a look at what shares the fund is invested in, and how these compare to other funds. Knowledge minimises risk.

Another minimiser is time. If you can afford to stay invested for a long period, say 15 or 20 years, you are very likely to have good returns to show for it. This is because you can ride out any turbulence in the market and will be able to take advantage of any troughs. If you will need your capital in a shorter period, risk becomes more important. Always consider the time frame when choosing an investment.

You also need to think about what you will use the money for. If you intend to use this investment for your retirement, you will think about different products. On the other hand, you might be intending to use it for a deposit on a house or car, or just as a nest egg. You might need the money to be readily available, or you might prefer having it just out of reach.

The worst thing to do

The worst thing you can do as an investor is to buy into the market (any market — shares, residential property, and so on), hold on to your investment while the going's good, panic and sell when there's a downturn in the market. You're likely to lose much of your money this way.

A better strategy is to research the investment properly before you buy it, so that you are confident it has long-term value, and then hold on to it through good times and bad, until you're ready to take your capital out. Don't sell because you've panicked.