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What Risks Are Worth Taking

Risk drives everything about your investments, but all risk is not created equal. For most investors (and most of the financial industry) dealing with risk is a lot like making sausage. People want what it gets them, the investment returns, but they don’t want to deal with the process and the uncertainty that risk implies. They want to get their returns without paying for them. This is impossible. Not only must you accept risk to get your returns, you also need to choose the right types of risk. We want to focus on building our portfolios around the risks that actually make sense. We want to find the risks that have positive expected returns. These risk factors are not necessarily things that everyone will need, or want, in their portfolio, but they are, by and large, the pieces on the board when you are constructing your portfolio1. Now, we can identify all sorts of interesting relationships in the data if we want. There are massive numbers of really smart people who do nothing but look for new and interesting relationships in the data. It would be weird if they couldn’t find relationships in the data. There are relationships all around […]

Provided by: Retirement Researcher

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