Exploring the relationship between people and their money.
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There are at least two perspectives for viewing risk:
[1] The Investment
[2] The Investor
If you are looking from the perspective of the investment, then maybe (just maybe) you can measure risk in terms of how much the investment moves up and down.
This is called standard deviation.
[You can read my essay in the current issue of Financial [...]
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[This is #3 in a series of Meditations on Risk.]
In the investment world standard deviation = risk.
This idea that how much something wiggles up and down equals risk is troubling me.
I am not sure why, but it might have to do with the fact that the word “risk” implies the unexpected. A surprise. Something that [...]
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[This is #2 of a series of Meditations on Risk.]
As a follow up to the last post about basing our decisions on the recent past, here is the bad news:
Long-term investing is not long enough
We only have 82 years of data. As funny at this sound, 82 years is not a lot. They are still [...]
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Tools or processes used in financial planning often come from other industries (e.g., life insurance, banking, etc.). Sometimes using these tools to guide investment decisions is comparable to trying to “measure temperature with a ruler” (David Loeper). If you can’t see the audio player in your email or reader, click through to listen to podcast.
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