Negative Risk

One thing that is clear about the traditional financial services industry: they will create products based on customer demand. That demand is why we saw so many Internet mutual funds launched in late 1999, early 2000. It’s why we saw so many creative ways to invest in real estate in 2007. And now almost everyone claims to be a specialist in risk management. Of course, for the most part, it’s just the same old story: nothing more than a claim. While it’s true that we have learned some things about risk over the last three years, it’s very important to make sure that any strategy you use to manage risk actually works instead of just being marketing hype. Based on what I’ve seen, there is an actual correlation between claims of risk management and the chance that you will lose money. Unfortunately it’s negative.