Get. And the other definitions. Yes.
Oh come on you’re looking at the next slide. No no no no no no. This is not right. But I’m glad you read it ahead of me so I’ll come back and use my own definition on your.
Yeah your actual return is different from your expected return.
I’m going to put you under seal on this party would you be ok with your actual return is much higher than the expected return. You see where I’m pushing a bit. So you think that’s risk to you. You as well. OK so now are your change going to add to the chance that you actually return would be lower than expected and is what do you worry about. What I’m trying to push you on is when I said do you think downside because that’s where most of us think. And the reason I say finance classes ruined you for life is after you’ve spent a few sessions in a finance class. When asked what is risk and I’m glad that this answer you say standard deviation varies.
No human being thinks about risk in terms of standard deviation. Not even Nobel Prize winners in economics you know what risk is. It’s that feeling in the pit of your stomach. Why are you sitting there watching the only stock you own meltdown and you can’t get through your broker. That is a risk unless you felted you really have an asterisk. Risk is an abstraction that’s why when you have an extended good market people can talk about risk but they really don’t get. You need a crisis. A bear market to remind you that’s why quarters like the last quarter of 2008 are good. You’re saying what do you mean. Good. It was horrific. I lost 15 percent of my portfolio. That’s good because it drew minds you of what risk is.
So I’m going to use that definition of it already used on me and talk a little bit about how I think the best definition of risk I’ve ever seen is actually the Chinese symbol for crisis. You know what. I’ve been corrected 50 times. I keep changing it and then somebody corrects me again or not. I don’t know Chinese so I could let me be upfront about it this could be something obscene as far as I know. So I’m going to pretend I’ve been told that this is the Chinese symbol for crisis or big risk and it’s a combination of two symbols.
Danger plus opportunity. To me it’s a perfect definition of risk you know why. Because it connects the two and if you want one. You’ve got to live with the other. Who amongst us doesn’t want opportunity we all want to make 70 percent returns right. But this is if you want to make 70 percent or don’t be willing to live with a lot of danger or you don’t like danger don’t ask me for 70 percent returns. Think of how many mistakes in investing we would avoid if we remember this Every scath. At its heart. What does it offer. Whether it’s Bernie Madoff or Ponzi it is. You can make a lot of upside. You can do a lot of opportunity with no danger and this is a reminder that that cannot be. To show you what happens when you lose that connection. Anybody from Orange County California. Don’t worry I’m not going to pick on you. I like orange cardigan. You’re from Orange County California. Great place to live sudden as always.
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