During bull markets, people naturally tend to only focus on returns. It's almost as if risk does not exist at all. Of course, this leads to taking more risk. When it doesn't tap you gently on the shoulder as a reminder that it's always lurking just behind the door, more risk is added.

That is exactly the reason we are in this mortgage crisis right now. And this was not done by a bunch of unknowing amateurs. Instead, it was done by professionals who are supposed to be experts in risk assessment.

What goes around comes around. So let's explore some simple rules of investing that history shows sooner or later will come knocking on your door. It might not be today or even tomorrow. But sooner or later, you're going to have to learn about the realities involved with investing your money in often-volatile financial markets.

Risk Tenet No. 1. For the individual investor, tenet No. 1 is that risk will always show up; the only question is when. If it never showed up, then your investments would be risk-free. And if they were risk-free, you would not get a return any higher than a Treasury note.

Why? No one is going to pay you more than they have to for anything. The higher returns you find in stocks are demanded by those buying the stocks to compensate them for taking a chance.

The chance is that they will not only fall short of their expected return, but that they will lose their invested capital. The difference between a chance of losing your money and actually losing it is due to pure luck.

Remember, never confuse what's familiar with what's safe.

You could, for instance, invest for 10 years without seriously getting burned by risk. But in the next decade, you might lose half your money. The point is that while risk is essentially the same in both periods, it can actually be higher during extended periods of good times.

And the reason is fairly simple. Investors unwittingly add more risk by thinking it's safe to do so. They perceive it's safer because risk hasn't shown up. But that is exactly the time to start worrying about it.

Risk Tenet 1a. If you think you can somehow avoid the impact when risk shows up by following the directions of Wall Street analysts or fund managers, all you have to do is observe what they have managed to do in the recent past.

Nobody can predict future market movements. In fact, the past week has demonstrated no one can predict even daily market movements. The unexpected defines risk. The only logical way to manage it is to assume it's going to show up.

Risk Tenet No. 2. Seemingly safe investments with high returns, including higher-than-normal yields, carry risks in line with the expected returns. The fact that you may not be able to easily identify the risk does not mean it isn't there. Higher returns are always compensation for taking higher risk.

In today's turmoil, when someone discusses risk, investors listen carefully. But less than a year ago, you might have heard many new investors saying they could tolerate a lot of risk and wanted to be 100% equity. There were a few who even wondered, why not simply put all your money in emerging markets? They reasoned that emerging markets have higher expected returns than U.S. stocks.

How much risk can I take? How much am I willing to take?

Risk Tenet No. 3. Forty years ago, when someone considered investing in equities, their first thought was: "How much risk am I willing to take?"

Today, or should I say a year ago, the first question was: "How much money do I want to earn?"

Ah, if it were only that simple.

We, as investors and now retirees, have been fortunate to have participated in the greatest bull market in history. But we are now in different times and different situations. Still, the old way is the proper way to develop an investment plan.

A year ago, when the subject of risk was mentioned, few listened. Today, it's easy—everyone is listening. That brings us to risk tenet No. 4.

Risk Tenet No. 4. When things get better, don't forget Risk Tenets 1-3.