In an recent edition of Oliver’s Insights, Dr Shane Oliver discussed risk and what it really means in relation to investment. He basically says that risk can mean different things – volatility, the risk of capital loss, the risk of not having enough income from your investment and the risk of not having enough in retirement. Each of these risks can be of greater or lesser importance depending on your stage in life, how much capital you have and your tolerance for risk.
What’s more risk is perverse. The risk of capital loss is often highest when you think it is low (i.e. after good times) and lowest when you think it is high (i.ee after a bad patch). Trying to get a handle on this is critical to being a successful investor.
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