In his book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Howard Marks (public library) writes extensively about risk. As the co-founder and co-chairman of a highly successful asset management firm called Oaktree Capital Management, he assesses investment risk daily and has unique insight into how it works. Risk is variously defined as volatility and uncertainty – he describes it as the “likelihood of loss.”
Most of us do not buy and sell securities for a living, but we all face risk whenever we make a decision. The quality of our outcomes depends on how well we deliberate and manage the inherent risk in our choices. We aim to select the best possible path, but there is always a risk that it will turn out differently.