When investing, risk is a given and if you choose to avoid it, at any cost, you will and in the last decade, you have borne a staggering cost in terms of returns unearned. At the other extreme, seeking out risk for the sake of taking risk is more suited to casinos than to financial markets, and as in casinos, the end game is almost always disastrous. The middle ground on risk is to accept that it is part and parcel of investing, to try to gauge how exposed you are to it and to make sure that your expected return is high enough to compensate you for taking that risk. Put simply, you are charging a price to take risk, and that price will reflect not only your history and experiences as an investor, but how risk averse you are, as an individual. In this post, rather than focus on your or my price of risk. I want to talk about the market price of risk, as assessed by all investors, and how that price changed in 2019.
Data Update 3 for 2020: The Price of Risk!
Data Update 3 for 2020: The Price of Risk!
Data Update 3 for 2020: The Price of Risk!
When investing, risk is a given and if you choose to avoid it, at any cost, you will and in the last decade, you have borne a staggering cost in terms of returns unearned. At the other extreme, seeking out risk for the sake of taking risk is more suited to casinos than to financial markets, and as in casinos, the end game is almost always disastrous. The middle ground on risk is to accept that it is part and parcel of investing, to try to gauge how exposed you are to it and to make sure that your expected return is high enough to compensate you for taking that risk. Put simply, you are charging a price to take risk, and that price will reflect not only your history and experiences as an investor, but how risk averse you are, as an individual. In this post, rather than focus on your or my price of risk. I want to talk about the market price of risk, as assessed by all investors, and how that price changed in 2019.