3 key takeaways on risk

This is a short article at Zero Hedge that is very instructive indeed and worth a read.

Point 1 looks at human risk aversion due to asymmetric evaluations of gain/loss

  • i.e. the pain of a loss is twice the joy from a gain 

Point 2 is that risk tolerance is inextricably intertwined with personality

  • My key takeaway from this is that if you are of the lower risk personality, that’s cool – you just have more work to do!

and Point 3 channels Seneca: “we are more often frightened than hurt, and we suffer more from imagination than from reality”

  • i.e.  “risk management” isn’t just about minimizing loss – it is also about not letting fear get in the way of optimizing investment outcomes.
This is a short article at Zero Hedge that is very instructive indeed and worth a read.

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