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

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28. Risk management

Managing risk is the core of managing investments [284] . The guiding principles of multi-asset investing are that certain risks are compensated over the long term, others are not and should be minimised, and that diversification across imperfectly correlated risk sources, both beta and alpha, reduces overall risk.

Risk is the driver of performance and without risk there is no performance. Absolute performance needs absolute risk and relative performance needs relative risk. Managing risk must be a core competency of any investor. Effective risk management is critical for the long-term survival of portfolios and investment management firms. The primary objective of any investor should be to minimise the risk of ruin. ...

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