Wind and Wave
The last couple of days I’ve been thinking about this idea from Ryan Henderson (@ccm_ryan on Twitter):

“Risk comes from not knowing. The best way to alleviate risk is research. Keep asking questions, keep looking for answers, and over time that risk will deteriorate.”

I think the main thrust of this point is spot on. The more research you do on an investment, the better understanding you will have of the risks you are taking.

However, there is an important nuance to acknowledge. You may be able to diminish risk substantially with research, but some risk will always exist. Profitable investment involves risk, and returns from investment are uncertain.

Time spent researching can be quite rewarding. But you can’t know everything about the future. All the publicly available information in the world about a particular company may not end up being half of what effects its stock price in the future.

I believe an investor needs a respect for uncertainty akin to a sailor’s respect for the sea. Entering the ocean is in effect putting oneself at its mercy. The ocean does not discriminate. It treats all who enter it as equals, regardless of how much you have researched it.

Sailors learn that they cannot control the ocean. Sailors don't actually catch a swell, the swell catch the sailors. The key is to put oneself in the right position at the right time to be caught by the wind and wave.

Risk doesn’t only come from not knowing. Risk is a perpetual aspect of life. So yes, alleviate as much risk as you can- but never lose that respect.
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