1.Risk is defined as the chance that gains on an actual investment or outcome are likely to differ from the expected return or outcome. There is a possibility of losing all or some of the original investment that is included in the risk. There are three types of risk. Non-business risk, business risk, and financial risk (Jeyachitra et al., 2010). 2.Return is defined as the amount of money lost or made over a period of time on investment. Investment can be expressed as a change in the value of the investment over a period of time. 3.The three categories that are used to define how investors respond to risk are based on their level of risk tolerance which includes conservative, moderate, and aggressive approaches. Based on the risk tolerance level the plan to invest by designing a portfolio can be decided by the investor.