Risk

In investing, risk does not mean loss — it means the chance that the outcome differs from what you expected, including on the upside. A high-risk asset can lose a lot or gain a lot.

Return and risk travel together almost without exception. If something were both safe and high-yielding, everyone would already have piled in and pushed the return down. That is why a guaranteed 20% is almost always a scam.

Risk is managed, not eliminated. Diversify to cut single-holding risk, lengthen your horizon so short-term swings matter less, and commit only money whose loss would not disrupt your life.

The key is knowing the size you can actually carry. However good a strategy looks in the data, selling partway through locks in the loss. The real limit is whatever still lets you sleep after a 50% drop. Writing down, before you start, the loss at which you would still not change the plan gives you a piece of paper that decides for you when markets shake.