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Investment Risk is a general term used to describe the variability or dispersion of returns of an asset over a stated time period. It can be measured in a variety of ways; including, variance, standard deviation, beta, value at risk and semi-deviation, among many others.
The measures above are quantitatively derived and objective measures of investment risk identified by practitioners and academics since the 1950s.
Synonyms: variability, dispersion
For context, here our focus is on the risks associated with the pricing of individual securities and portfolios. In both cases, more subjective risks are described in great detail in public filings if the investments are are public. But if they are private, then the burden is on the investor to inquire about risks.
The risks section of an annual report for US-based companies that file in accordance with SEC requirements is vast. Sometimes it eclipses 30-pages and is written in fine print by corporate attorneys. Risk disclosures for a public mutual fund are less elaborate, but worth a look for detail-oriented investors.
Jim: When you started this firm, how did you
connect with clients on the topic of investment risk?
Bev: I asked them to define it.
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