Diagnosing what 'risk' really means

Diagnosing what 'risk' really means

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Professonal Adviser's resident head doctor and behavioural finance expert Greg Davies on what 'risk' really means…

Risk: an important but misunderstood concept. Important, because investors should avoid it unless they are well rewarded for taking it. Misunderstood, because many investors don't appreciate what risk really is. Frequently, we are told, risk is volatility, a measure of the amount that investments fluctuate along the journey. But if this is what we expend effort avoiding, we're focusing on the wrong thing. A good analogy might be an urgent sea voyage: going full-engine into waves creates turbulence, which might be unpleasant, but - unless the turbulence slows the journey - it's n...

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