You will get different answers depending on whom, and when, you ask.
In 1999, risk meant making less money than someone else. What many people feared was bumping into someone who was getting richer than them by trading dot-com stocks.
In 2020, risk meant that the stock market might keep dropping until it wiped out whatever traces of wealth you still had left.
The risk is losing money. Losing some money is an inevitable part of investing, and there’s nothing you can do to prevent it. But you must take responsibility for ensuring that you never lose most or all of your money. Risk exists in another dimension: inside you.
At the peak of every boom and in the trough of every bust, Graham’s immortal warning is validated constantly: “The investor’s chief problem — and even his worst enemy — is likely to be himself.”
Give thought as to what kind of investors they are. Being able to understand yourself would go a long way in making the right decisions. Enterprising or defensive? Investor or speculator? In case you think you are both, he has some words of advice: Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.
Investing isn’t about beating others at their game. It’s about controlling yourself at your own game. By developing your discipline and courage, you can refuse to let other people’s mood swings govern your financial destiny. In the end, how your investments behave is much less important than how you behave.
Investing is not an emotional undertaking. It’s analytical and unemotional, which is why it should be approached like any other business.
You look for value where others don’t see it and take advantage of that. Fear and greed will cause investors to bid up the prices of stocks to nosebleed levels or push them to unreasonably low levels. Don’t react. Stay focused on your research and investment thesis. Get swayed by cold, hard facts, not emotion.