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Author: Rayvt Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: Re: Hi gang... wow!!! Date: 9/17/2013 3:22 PM
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More at: https://dl.dropboxusercontent.com/u/24845413/investment.risk......


Great. Downloaded it. Thanks. Now to warm up the printer. ;-)


It should be easy to measure the risk of an investment. Sadly, that is not the case. There are more ways to measure the risk of an investment than you can imagine.
True. That's why it was kinda puzzling that Dave got stuck on CAGR / MaxDD -- which indeed is not a risk metric that anybody pays much attention to.

: Investors should take the least amount of risk to reach their investment goals.

If you do not agree with that statement, then you really have no business reading or caring about what’s in this White Paper.

Heh. For myself, I disagree with this statement -- but I'll read the Paper anyway.
He's making the classic mistake of thinking that his way of thinking is the only correct way, and that anybody who doesn't agree with him is wrong. CC, I'm surprised you didn't tee off on this -- it's the same mindset that the Liberals in Washington have. To them, any disagreement with their preferred policies are because disagreement is a sign of an Evil Racist.

Why would someone invest in something more risky if the potential return is the same as a lower risk investment?
This is a tautology, and hence meaningless.
Ahh, but what if the riskier investment has a potential HIGHER return? That's what the whole subject of risk-adjusted return is all about.

Not that it means anything, and not appearing to be bragging, but this is a conversation I had a few years ago when I chose a certain Advisor to invest some money in a certain strategy of his. As always, the question came up as to if I was taking too much risk in relation to my assets, and my Investment Goal for that account. I had to think a little bit, and then told him, "With this account, I'm just looking to be running up the score."

To some people -- probably to most people -- if they had $5M they'd put it all in tax-free muni bonds and know that they'd never run out of money. But there is a small percentage of people who would put maybe $1M or $2M or $3M in munis or Tbills -- enough to keep them from having to eat Alpo -- and invest the remainder in the same way that they got the $5M in the first place. To paraphrase the dot-com Discover Broker commercial, "You never know when you might want to buy an island. (Well, technically, it's a country.)"
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