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Multi-Asset Investing: A practical guide to modern portfolio management by Yoram Lustig

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3. Risk objectives

The second set of investment objectives, after return, is risk. Risk is a less familiar, more abstract concept than return. Although it is natural for investors to focus on returns, as that is what they seek to achieve from investing, risk must not be neglected; to earn money risk must be taken.

Risk should be deemed not only as an unwanted consequence of investing (the dark side of investing), but also as a necessary, scarce resource, as only by taking risk can investors generate returns [44] .

The objectives of this chapter are to explain risk and review some of its different definitions and types. Only when risk is understood can informed investors decide on the appropriate risk level and types of wanted and unwanted ...

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