We've all probably heard that risk isn't volatility. But then what is it?
To summarize, risk management in investing involves:
- Identifying all open-ended threats which cannot be eliminated; * Approaching risk management in a probabilistic manner, not a targeted manner; * Quantifying the possible losses in all risk scenarios materializing; * Comparing the possible downside to the possible upside, and ensuring a sufficiently positive upside asymmetry exists.
If you're interested in learning about risk management in greater detail, check out the full article here: