Better definition of investment risk

[matjung]

Most of my assets are at Vanguard, which doesn't have much in the way of tools. Another example is my Roth IRA, which didn't lose much then suddenly shot upwards. Anything very profitable is considered volatile and therefore risky by most defintions.

I couldn't find Tesla's standard deviation on Yahoo or Morningstar, but I think it illustrates the point. It has a 5 year standard deviation of 57%. Did it ever lose 57% in the past 5 years? No - the volatility is based on upwards moves - and that, I claim is not risk.
Tesla Inc (NASDAQ: TSLA) Stock Report

Hi OverThinkMuch
If we have two stocks who develop like
a)
10 -> 12 -> 15 -> 19 -> 24 -> 31
b)
10 -> 12 -> 14 -> 16 -> 18 -> 19
None of them went down, but both have a standard deviation and volatility.
c)
10 -> 9 -> 8 -> 7 -> 6 -> 5 -> 4
It goes down all the time.
It is also having standard deviation and volatility.

Maybe you are not looking for something that measures investment risk, but for something that predicts investment results or prevents losses from happening.

A lot of people may disagree.
My opinion, risk management, risk measurement, performance attribution, benchmarking. All this stuff has not been invented to prevent losses from happening. That stuff helps to describe the characteristics of a portfolio and it can explain afterwards why the portfolio under - or outperformed a benchmark in a certain period of time.
In addition it helps to value Options and Warrants.

Regarding upward moves.
It is a risk, the risk of not being invested when it goes up.

 

[chassis]

Seems a good time to recall Mr. Buffett’s “bleak future” assessment on bonds in the 2020 shareholder letter. The outlook for bonds hasn’t materially changed since that letter was written in my view.

 

[DjBrown]

Seems a good time to recall Mr. Buffett’s “bleak future” assessment on bonds in the 2020 shareholder letter. The outlook for bonds hasn’t materially changed since that letter was written in my view.

That letter was I think from February 2021.

The outlook for bonds and cash is even worst today. Buffet is saying that for few years now. He also owns ton of cash though

 

[OverThinkMuch]

Thank you for correcting me on JEPI, its not fixed income. Thoughts on PDI and EOI? JEPI is still useful for monthly income in retirement, rather than selling 4% a year of VTI....right?

Bond income is taxed like ordinary income, while selling VTI would be taxed at lower long-term capital gain rates. So selling VTI (or taking stock dividends) would save you money in taxes. Currently VTI issues 1.1% dividends, so you'd only need to sell 2.9%.

 

[OverThinkMuch]

... standard deviation and volatility.

Maybe you are not looking for something that measures investment risk, but for something that predicts investment results or prevents losses from happening.

A lot of people may disagree.
My opinion, risk management, risk measurement, performance attribution, benchmarking.
...
Regarding upward moves.
It is a risk, the risk of not being invested when it goes up.

Most of my portfolio is passive (ITOT / IXUS), which I've held through the 2008 financial crisis. A measure of risk should look at what crashes someone has experienced, and how they reacted.

There are many possible investments, not just "it" that goes up. I sold Nasdaq 100 investments because of inflation, P/E values, Covid-19 risk, Fed risk and overall a risky year with a highly optimistic stock market. But that market timing just moved me from Nasdaq to Financial sector ETFs. So maybe risk would involve selling down to cash?

 

[matjung]

Most of my portfolio is passive (ITOT / IXUS), which I've held through the 2008 financial crisis. A measure of risk should look at what crashes someone has experienced, and how they reacted.

There are many possible investments, not just "it" that goes up. I sold Nasdaq 100 investments because of inflation, P/E values, Covid-19 risk, Fed risk and overall a risky year with a highly optimistic stock market. But that market timing just moved me from Nasdaq to Financial sector ETFs. So maybe risk would involve selling down to cash?

You could discuss this topic in a forum for Technical Analysis and Chart Technique. They may know a suitable risk measure.

 

[OverThinkMuch]

You could discuss this topic in a forum for Technical Analysis and Chart Technique. They may know a suitable risk measure.

I have no interest in Charting. They try to predict stocks, not assess risk. In my view, it's bogus. But if enough people do it, I imagine it's useful knowing what other investors will do. But I steer clear of it.

 

[matjung]

I have no interest in Charting. They try to predict stocks, not assess risk. In my view, it's bogus. But if enough people do it, I imagine it's useful knowing what other investors will do. But I steer clear of it.

If we assume for a moment, we have two funds.
Both from Blackrock iShares following a different strategy.
In a period of one week, both went down by 3%.
What kind of information or insights do you expect to get from a risk measure?