Risk is embedded in how much you know about the business and how confidently you can predict the future outcome.
Circle of Competence: The more certain you are about the business outcome, the less risky it is.
Time Horizon: Shorter the time-horizon, higher the risk. Benjamin Graham: "In the short term, markets are a voting machine but in the long-term, it is a weighing machine."
Quality of Business: The higher the likelihood that business can keep earning above average returns, the better the business.
Quality of Management: Is Management looking after minority interest.
[Standard Deviation and Beta are NOT good proxies of risks.]
Circle of Competence: The more certain you are about the business outcome, the less risky it is.
Time Horizon: Shorter the time-horizon, higher the risk. Benjamin Graham: "In the short term, markets are a voting machine but in the long-term, it is a weighing machine."
Quality of Business: The higher the likelihood that business can keep earning above average returns, the better the business.
Quality of Management: Is Management looking after minority interest.
[Standard Deviation and Beta are NOT good proxies of risks.]
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