Chapter 2. Understanding the Concept of Risk

“Risk comes from not knowing what you’re doing.”

Warren Buffett

“Risk is good. Not properly managing your risk is a dangerous leap.”

Evel Knievel, motorcyclist

Risk is part of everyday life. Whether you cross the street, drive a car or motorcycle, take an airplane flight, eat in a restaurant, or invest in the stock market, there are risks involved—some small and some large. Actually, almost everything you do has some degree of risk associated with it. So it is important that you understand the risks of investing before you find out the hard way that you didn’t pay as much attention as you should have, and you now have stock market losses beyond what you can afford. And possibly the ...

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