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19
Jun
Lessons from the Road - Real Risk vs. Perceived Risk
Another “Lesson from the Road,” sometimes real risk is very different from perceived risk. It’s imperative that your investors know the difference.
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June 19th, 2009 at 11:14 am
Mark,
I am assuming your wearing that helmet to reduce reduce your real risk of a head injury…oh wait, could that be, yep I think it is like a prudent investor would use diversification to redcuce the real risk in their portfolio.
If you haven’t ever seen your true diversification in your portfolio chances are your real risk is higher than it should be and you better find someone to show it to you.
Eddie Overdyke
Atlanta GA
800-254-1027
June 19th, 2009 at 11:15 am
Hi Mark,
I just picked up an interesting book, “Meltdown” with a forward from Ron Paul.
It brings up a concern relative to Risk and the free markets. With all the meddling of our governments in the free market system, and how much of an impact this has short term and long term, does it change how we invest, or how we view risk? Thanks for all the great insights,
Hank
June 19th, 2009 at 11:16 am
Mark,
Great Analogy, Traffic Hazards versus the market hazzards, Another opportunity to tell our story of investing in the Free market funds.
June 19th, 2009 at 11:16 am
Mark,
Great talk about “Safe” investing. I just coached a client on how risky it is to sell her positions and move to CD’s. She thinks inflation will go sky high yet, wanted to lock in about a 4% loss by getting 1.25%, plus taxes because of the economy. She’s thinking differently now. Thanks for the talk.
Nice camera movement, I think I’ll go throw up now.
Peace,
Matt Starke
http://mattstarke.com
June 19th, 2009 at 11:42 am
Mark:
Great analogy and description. It is amazing how myths simply don’t get along well with the truth and raw data in dozens of areas in our lives. Ignorance of the facts doesn’t mean they don’t exist. Ask the family of the rider in the zone who crossed in front of the car at that intersection. Ignorance has consequences. Keep on truckin’!
June 19th, 2009 at 5:16 pm
Great lesson Mark. I had a client tell me his mother didn’t like risk and wouldn’t invest in the stock market. I chuckled and said, “It’s not that she doesn’t like risk, she doesn’t like market risk. She loves inflation risk.” He got it.
June 19th, 2009 at 9:33 pm
Mark,
There is a whole field of interest called “innumeracy”. Basically, number illiteracy. Errors in “computing” probabilities are a subset and this also appears in some behavioral finance studies. Your observation on the bike trail and your ability to see the parallel to the world of investing is brilliant and greatly appreciated.
June 26th, 2009 at 7:16 pm
Mark,
You always seem to come up with the best ideas to explain difficult to understand concepts in a simple example.
Keep coaching. I’ll keep learning. Thank you to all those responding with each of your insights as well. I am always learning something I can use immediately.
Ross