Don’t avoid risk, learn to control it

Risk comes from not knowing what you're doing. – Warren Buffett

When people around me learn that I buy stocks, I almost always get the “This is risky!” typical answer.

Risk is unavoidable, even if you think it is.

The reason you’re confident a bus wont hit you when you cross the street is not that this risk is non-existent. That risk didn’t increase or decrease either. So what makes you so confident? Is it because you can read the future and predict whether or not there will be a bus? Can you completely avoid the risk of a disaster? Still, do you take that risk everyday?

The same can be applied for risk in any investment. You can’t predict events that will influence your profit. You can’t avoid the risk of you losing money. But you can be confident about your investments. What makes you confident when you cross the street is your capacity to assess your environment correctly and to adapt accordingly. You have confidence that you will be able to either stop promptly and let the bus pass, or dodge it by running forward or jumping to the side.

By controlling risk, you accept that crossing the street everyday is somewhat non risky.

You can do the same for investing.