WHAT IS RISK?
Everywhere you go you hear about risk and how to avoid it...
So what is the definition of "Risk" anyway? Is anyone talking about this on tv?
Risk - is defined as the chance of permanent loss of money. No one wants to lose their money.
"There is no such thing as no risk, there's only the choice of what to risk, and when to risk it" - Nick Murray
So what's the opposite of risk? It's SAFETY.
Safety is defined as "the preservation and enhancement of purchasing power", which, in the long run, is the only real definition of "money".
So what is the safest place for your money over your lifetime?
Again, using history as our guide, over the last 2 centuries stocks have been safer against purchasing power loss than any other asset by a large margin. The long-term return of large-company stocks has been, AFTER inflation, 7% per year.
Many people used to think CDs and money markets were "safe", only to see their purchasing power wiped out by inflation and taxes before the end of their retirement.
Owners of the great American and global companies accept the inevitable volatility on the way up, because "volatility" is NOT "risk". They are two different terms.
"Volatility" is defined as variation from a trendline.
The only time "volatility" connects with "risk" is when an investor sees volatility and sells, thereby realizing the risk they feared in the first place.
But when owning stocks and compounding their rising dividends over time, the volatility is a natural part of a constant long-term upward trendline that has far-exceeded inflation.
For anyone concerned with minimizing risk of losing money over their lifetime, that is real safety.
Sources: J. Siegel Stocks for the Long Run, N. Murray, Standard and Poors,