Why Controlling Risk is Critical To Good Stock Market Returns
Let's say you make an investment you consider risky. Maybe you buy a stock at $100 today and sell it next year at $200. Was it risky? It depends. Maybe the investment was exposed to many risks that didn't materialize. Or maybe you bought another stock at $100, and it fell to $50 when you sold, marking a 50% loss.
Does that mean it was riskier than the other investment? Not necessarily. The fact that something happened doesn't mean it was bound to happen. Probable things fail to happen – and improbable things happen – all the time.
Investing involves dealing with the future. The challenge? The future is inherently uncertain. Thus, risk is inescapable. We must confront it.
Source Fool.com
