Our relationship with risk has evolved over time and under very different circumstances from those we find in modern capital markets. We both need and fear risk if we want to achieve anything of value. This includes both investor returns, as well the success of the species.
In other words, if investors want to avoid the sort of volatility we saw in the fourth quarter, they only have to give up much of the returns to get it. Anything else smacks of the illusory free lunch of getting returns without the risk.
This column provided by Bloomberg View.