1. Life Is a Series of Risk-and-Return Decisions—and So Is Investing

In the critically acclaimed movie The World According to Garp, T.S. Garp (played by Robin Williams) and his wife finish touring a home for sale with their realtor. As they stand in the front yard and debate whether to bid on the home, a prop plane with engine trouble crashes into the roof. With the smoldering plane’s tail sticking out of the roof, Garp turns to his wife and realtor and says:

“We’ll take the house. Honey, the chances of another plane hitting this house are astronomical. It’s been pre-disastered. We’re going to be safe here.”

Most of us never face a risk/reward decision as dramatic as the one made by Garp. It is equally unlikely that you are as consumed with risk ...

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