Why taking on excess risk is not the answer

Risk comes in many forms. At a client level, we tend to concern ourselves with the risk of loss of capital, purchasing power and opportunity. At the broader macro level, there are risks delivered by socio-economics, politics, geo-politics, and so on, that one has to adapt to. As an investor, one is effectively paid to take risks via a “premium”, which itself fluctuates in value day to day and can be bought and sold to others at a mutually agreeable price. However, the additional factor we all have had to contend with in markets is that a market clearing price, or even a notional “fair...