I have two rules in investing:
Rule number one: don’t lose your money.
Rule number two: don’t forget Rule number one.
Warren Buffet’s quote emphasized well the importance of controlling risk. Investment always involves risk. Assets perceived to be `safe’ such as cash or bonds usually have lower returns. In addition, they may involve hidden risk. For example, cashes value as represented by its purchase power will decline with inflation and the price of a bond is inversely related to interest rate. Therefore, risk management should be carefully examined in all investment decisions.
Following the submenu to explore comment risk measures and methods for controlling risks.