Which of the following would be considered the highest risk portfolio?
Risk is always the topic of discussion on Wall Street and financial media and understandably so. Who wants to lose money? Nobody. Risk is the perfect selling tool for Wall Street so that they can scare you away from managing your own money, give it to them, and have them charge you fees. Risk is something that is completely misunderstood in the investing community.
The truth is, risk is determined before we make the trade or investment. It has nothing to do with pairing trades against each other in order to “reduce risk”. This is something that has been fabricated by economists and college professors who have never made a trade in their lives before.
For the rest of this article, we are going to give our readers two sample portfolios and then ask the question “which of the following would be considered the highest risk portfolio?”. After that, we will show you where risk truly comes from.