Investments are risky. The future is uncertain. While both relates to the same underlying concept of randomness, how many of us truly understands the difference?
Risk involves an unknown outcome that can be calculated or defined. For example, playing poker or investing in a stock can be risk, but people always know their odds and possible losses. Uncertainty, in contrast, implies an unknown outcome that cannot be calculated or identified. For example, no one has the perfect foresight to predict the duration of a market correction or an economic recession.
— Ronald Chan, The Value Investors
How do we avoid them?
Everyone dislikes randomness. How do we avoid them it they are random?Risk is an element present in every investment. It is unavoidable if we wish to be in this field. However, what we can do is picking the bets where we deem that the risk is minimal. ...
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