- Risk can’t be defined as volatility as it includes factors like your retirement, your children’s college tuitions, mortgage payments, unemployment, etc.
- In life altering situations, nobody thinks about the highest expected utility hypothesis.
- The personal side of risk is more important than any ratio, coefficient, or return potential.
Defining investing risk is crucial for a healthy approach to investing. Some say risk is the chance that something goes wrong, some define it as volatility, others as the risk of permanent loss. However, 99.9% of the articles, news reports, and videos, don’t even mention risk, let alone define it or quantify it for the discussed investment. This is because 99.9% of people don’t like to face reality. It’s human nature to put our heads in the sand and postpone difficult decisions. More →