Chapter 4
Investment Risk
The journey to your outcome
‘Risk means more things can happen than will happen.’
Elroy Dimson
Investing is risk. Risk is the flipside of return; there is no return without risk. The journey to your desired outcome is more likely to be bumpy than smooth.
In this chapter we will define what investment risk is, assess your appetite for risk, show how to measure risk and introduce a number of concepts that we will use throughout the book. Crucially, we will emphasise that to generate investment returns you must take investment risk.
Investment risk means you might not achieve your target outcome, even when making all the right decisions along the way with the available information at the time of making them. Investing ...
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