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Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome sometimes exists (or existed). Potential losses themselves may also be called "risks". Any human endeavor carries some risk, but some are much more risky than others.

6 votes

Why is "1" subtracted in the formula for nominal risk-free rate?

When working with rates, you have to also work with the base. So you have $100 (I'll use US currency because I have a US keyboard). If you have a real rate of return of 20% and an inflation rate o …
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2 votes

Why are tech stocks risky investments?

In 2005, MySpace was on top of the world. Everyone had an account there. In 2018, MySpace is a footnote. Even the people with accounts there don't bother to use them. They all moved to Facebook. …
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9 votes

Why do people save so much?

I then assumed that your post-retirement returns would drop to 3% (because you are withdrawing, which magnifies bad markets and requires you to set aside more money in low risk/return investments). …
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27 votes

Why cannot LLCs be used to negate increased risks when doing leveraged investments?

Alright, so the bank would still, then, agree to lend 10K against the 10K in equity, right? That still significantly increases profits (24% vs 15%) and would afford the same loophole. As a genera …
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-1 votes

As a 22-year-old, how risky should I be with my 401(k) investments?

If you want to get a lower risk than a 70/30 mix, then you should move into cash equivalents. Cash equivalents are actually safer than stocks and bonds either individually or in combination. …
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