Why you can’t avoid risk when investing

Risk is a tricky word to pin down. Some people might say “riding a bicycle on the road is too risky” or “I only have a cash ISA because shares are too risky”. Others will think those views are silly. There isn’t a clear line between risky and acceptable. It’s a personal question of what you feel able to tolerate. When it comes to investing, people fixate on the risks of the stock market: What if the market crashes? Will I get the return I expected? How much can I draw down from investments each year without running out of money? Those are all valid concerns. But they are far from the only risks out there. What’s more, if you spend too much time focusing on just one risk then you are liable to make poor decisions. As The Investor wrote years ago in The first law of thermodynamics and investing risk: “Investing risk cannot be created or destroyed. It can only be transformed from one form of risk to another.” So what’s risky for you? That’s for you to decide. Risky business Many kinds of…