Dante Loi
Spain
6m
Volatility is not risk For retail investors like us, daily price fluctuations are not a good measure of risk. The only thing that truly matters is the ready availability of money when we need it. In that sense, the riskiest investment a retail investor can hold is real estate. Say you own a studio apartment as an investment, and suddenly you need cash to take your personal business to the next level. To convert that property into money, you first need to go through the tedious and lengthy process of finding a buyer and agreeing on a price. And that’s without even considering another limitation: retail investors rarely have the financial power to diversify a real estate portfolio. At best, you may own a few properties, often concentrated in one geographic area for obvious logistical reasons. In other words, true diversification in real estate is out of reach for most retail investors. On the contrary, the stock market is highly liquid. At any given moment, there’s a buyer ready to purchase your shares if you need cash. And with a relatively small budget, you can build a truly diversified portfolio. The downside? Because there’s always a buyer, you see prices moving up and down constantly as bids come in. But that perceived risk isn’t real — it’s just our brain fooling us.
Risky, is it?
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Volatility is not risk.For retail investors like us, daily price fluctuations are not a good measure of risk.The only thing that truly matters is the ready a...
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