Most investment advice is focused around managing risk. But what exactly is risk?
In an upcoming book, famed author William Bernstein separates the concept of risk into two categories. The Wall Street Journal reviews:
What Mr. Bernstein calls "shallow risk" is a temporary drop in an asset's market price; decades ago, the great investment analyst Benjamin Graham referred to such an interim decline as "quotational loss."
"Deep risk," on the other hand, is an irretrievable real loss of capital, meaning that after inflation you won't recover for decades -- if ever.
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