A celebration of the stock market by Jay Walker, author of The Brink's Truck Burst Open on Wall Street! A Holistic Approach to Finding The Easy Money In Common Stocks. Facts and ideas on how to outperform the general market, portfolio management and risk, with a growing focus on how climate change should affect your investment strategy. All wrapped nicely with a value-oriented investing bias.
Saturday, February 18, 2006
Risk
A four letter word: Risk.
Risk is not volatility (beta) and it's not a lot of things that the academics ponder. In my mind there's two kinds of financial risk: the risk of permanent loss of capital, and the risk of returns insufficient to meet future expenses.
They are very different, and usually arise from two different places. Permanent loss of capital usually arises from chasing too high a return under too uncertain circumstances.
Insufficient return risk usually arises from a belief that complete safety of capital exists, and that capital can be completely guarded. This mindset usually results in achieving far too low a return, given the circumstances.
JW
The Confused Capitalist
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