Risk Factors in Investment Planning

 Safeguards Against 
 Obvious as Well as Subtle Dangers 

The financial arena bubbles over with risk of all types. A prime example lies in the smashup of an asset caused by a bombshell in the external environment. Another showcase is the cutdown of a portfolio due to a rash move by a jumpy investor.

One way to classify the slew of threats is to rate them in terms of visibility. In that case, the bogeys span the spectrum from the subtle to the obvious.

Another approach is to gauge the threats according to the level of impact. At low end of the scale is a mild discomfort that leaves no permanent scar. By contrast, the high end of the range involves a mortal blow that wipes out an asset completely.

As a rule, the two traits of severity and visibility are interlinked. In most areas of life, we would expect the major threats to be highly prominent and the minor bugbears to be less so.

In the wacky world of investment, however, the situation is often turned upside down. In that case, a mild menace attracts scads of attention while the mortal danger is all but ignored.

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