Source: The Intelligent Investor

01 Volatility is not risk itself.

1. Risk is the possibility of loss.

2. If we avoid losses, profits will come naturally.

3. Investment risk is largely unobservable in advance, except by those with extraordinary insight, and even after exiting an investment. This is precisely why many financial disasters we have witnessed were not successfully predicted, and people failed to manage risk well.

4. The cornerstone of an outstanding portfolio is risk control, which is a great and covert achievement.

5. The biggest challenge in investing is controlling uncertainty while still maintaining significant upside potential.

6. I don't think risk is measurable, nor do I believe that the past is absolutely applicable.

7. Investment is only about one thing: responding to the future. No one can predict the future with certainty, so risk is unavoidable; managing risk is an essential (I believe the most fundamental) element of investment.

8. When considering an investment, an investor must first determine the risk involved and their tolerance for absolute risk; second, determine whether the expected return justifies the risks taken; and third, be clear about the Concept of 'risk-adjusted return'.

9. If a higher-risk investment can reliably generate higher returns, then it is not truly high risk!

10. Higher-risk investments are only related to increased uncertainty and a higher probability of loss, leading to even more uncertain outcomes.

11. Volatility is not risk itself. Risk is the probability of adverse outcomes, while volatility is at best an Indicator of the presence of risk.

02. The greatest risk is thinking there is no risk.

12. The largest investment risks are located in the least detectable places, and vice versa.

13. The most risky thing in the world is when people feel there is no risk, because when people believe there is no risk, they will take risks in many things, making this world a place full of risks.

14. When others engage in high-risk behavior, it is even more important to act cautiously.

15. When everyone believes that something carries no risk, prices often become inflated to a level that entails significant risk.

16. When everyone believes something is risky, their unwillingness to buy often drives prices down to the point of having no risk at all. Widespread dissent can minimize risk because all optimistic factors in the price are eliminated.

17. What determines whether your investment is risky is not what you bought, but at what price you bought it. Good investments are not about "buying well," but rather about "buying at a good price."

18. Only in difficult times can we discover which investments are risky and which are not.

19. "This time is different" is the most dangerous phrase in the investment world, particularly when market prices reach historically extreme valuation levels, yet many people say "this time is different" at such times.

20. Risk is best assessed through subjective judgment rather than modeling; risk cannot be measured through measurement. This must be the domain of experts.

There's a saying that it is better to be vaguely right than precisely wrong.

21. Think about it, if you have a car and it has Insurance, and nothing happens over the course of a year, would you feel that you wasted money on the Insurance? If you are sensible, you should always have Insurance, but also hope you never need to use it.

In my opinion, risk control is the same.

03. Taking on too little risk is a risk in itself.

22. The reason outstanding investors are outstanding is simple: they have an extraordinary sense of the probability distribution of future events, which allows the potential returns to compensate for the potential risks, thus achieving 'asymmetry.'

23. Understanding the difference between risk control and risk avoidance is crucial for investors.

24. Risk avoidance is essentially not doing anything that has uncertain outcomes and might have negative effects. However, in essence, investing involves pursuing attractive returns while bearing uncertainty.

25. The risks you are aware of, the risks you can analyze, the risks you can diversify, and the risks that, if taken, can yield rich rewards... such risks should not be avoided.

If you have true insight, you can cautiously take on such risks and profit from them.

26. If your serves have never gone out, then your serves might be too cautious to win. Investing is similar.

27. Avoiding risk is likely to lead to avoiding returns. Taking too little risk is a risk in itself. Most people rationally understand this, but due to human nature, few can accept the view that being willing to incur some losses is a necessary path to investment success.

28. Individual investors who avoid risk may ultimately find that their returns are insufficient to support their cost of living. Professional investors who take too little risk may not meet client expectations or benchmarks.

29. The more we believe in our own judgment, the more confidence we have in our decision-making abilities. The courage to take risks is worth pursuing in itself.

30. The bottom line of pursuing excess investment returns is clear: you cannot expect to make money without taking risks, but you also cannot expect to make money just by taking risks; you must sacrifice certainty, but do so skillfully and wisely, and remember to control your emotions.

编辑/jayden