~ EXECUTIVE SUMMARY ~
Dollarlogic in One Page
You have heard it your entire life, and it is wrong. Risk does not equal reward. If it did, why would you wear a seat belt?
What is risk? Risk is not only the worst that can happen, but what is most likely to happen. If negative results equal higher risk, positive results equal lower risk.
Because stocks are likelier to earn higher long-term returns than bonds (4% yearly average for 40-year rolling periods) stocks are less risky than bonds.
Short term, however, stocks are unpredictable; math is against you. A loss of 10% has more impact than a gain of 10%, so the key is to reduce losses, not to increase returns.
Does that mean that as a stock investor you now have to predict the markets? No. No ...
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