Chapter 2. Risk and Disaster Don’t Have to Go Hand-in-Hand
John Bishop, who spent years working as an engineer for Boeing, defines risk in this way:
• A risk is the probability of a consequence.
• A mitigation reduces the risk’s probability or consequence.
• An issue is a risk manifested.
Risk is inherent in all corners of the market—from leveraging strategies to Treasury bonds—but a whole bunch of other elements join in to create sheer disaster from it. Most often, the culprit is simply emotions. Perhaps you have rationalized your way out of selling when you should have sold, leading to more losses. Or perhaps you bought in a fit of exuberance without considering whether a position was correct for you, or whether buying entailed more ...
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