Final answer:
Investors protect their interests by assessing risks, diversifying investments, and understanding potential returns. Key methods include analyzing financial markets, investing in various financial assets like bonds, stocks, and mutual funds, and starting investments early with an eye on long-term goals.
Step-by-step explanation:
Three basic methods used to protect investors include analyzing the risk involved in different types of financial assets, understanding the importance of diversification, and knowing the potential returns associated with investments such as bonds, stocks, and mutual funds. To invest wisely, it is crucial for investors to identify their goals and understand the risks and returns involved in various financial markets. This knowledge helps in making informed decisions. For example, governments and corporations may issue bonds to raise funds for long-term projects, and investors can benefit from predictable interest payments from these bonds. On the other hand, stocks can offer potentially higher returns but come with greater volatility and risk. Mutual funds offer an opportunity to invest in a diversified portfolio which is managed by professionals, potentially reducing risk and providing better returns compared to individual investments. Lastly, it is essential to start investing early and choose investments that are suitable for one's risk tolerance and financial goals.