RISK

“The best way to minimize risk is to think.” Warren Buffett

"The linchpin of our philosophy is to think critically about risk, especially low-probability risks. Our old fashioned style embraces humble skepticism and is wary of most modern risk management tools and ideas (i.e. broad diversification, financial models, derivatives, etc). Our concern is such tools and ideas can act like mental shortcuts and subtly diminish one’s appetite for critical thinking." Allan Mecham

"Reducing risk is not about adding assumptions and complicating your investment model, but about simplifying by investing in what you know best." Francisco Garcia Parames

“If we put our head in the lion’s mouth, we shouldn’t be surprised if it’s bitten off.” Peter Bevelin

"Risk never looks like risk when it’s generating a high return." Howard Marks

“Make sure that the probability of the unacceptable (ie the risk of ruin) is nil.” Ray Dalio

“Never set yourself up for the knockout punch.” Kyle Bass

"Never risk what you cannot afford to lose." Sam Zell

“Whatever you do, make sure you're around tomorrow." James Dinan

“People criticize me, they say I find seven risks for every one that exists. But that’s my job. My job is to risk manage and be out there worrying about my clients money.” Jeffrey Gundlach

“If a gambler has a risk of terminal blow-up (losing back everything), the ‘potential returns’ of his strategy are totally inconsequential.” Nicholas Nassim Taleb

“If we can’t tolerate a possible consequence, remote though it may be, we steer clear of plantings its seeds.” Warren Buffett

“We have always run the fund to avoid taking a chance for spectacular gains at the risk of spectacular losses – we typically hedge out some of the upside in any investment to avoid much of the downside. We think our ability to manage risk differentiates us, and it’s something we’ve always put a premium on. I think we pay more respect to the tails of the bell curve than most funds do: we tend to be at the tighter end of the spectrum.” Izzy Englander

"We will bypass many great investment ideas if we think there's even an infinitesimal potential for a zero, because it's just not something we can underwrite. We prefer downside probabilities where if it is a zero it means it is a 0% IRR, but a 0% IRR still keeps our capital intact." Christopher Begg

"I am probably more comfortable with risk than most people. That's because I do as much as I can to understand it. To me, risk-taking rests on the ability to see all the variables and then identifying the ones that will make or break you." Sam Zell

"I’m firmly convinced that investment risk resides most where it is least perceived, and vice versa." Howard Marks

“The real risks are always the ones you don’t foresee because if you do foresee them, you mitigate them or insure against them.” Jim Chanos

"Paradoxically, it is exactly then, when investors don’t see any risk in a market that it becomes the riskiest. But this is usually realized later" Francois Rochon

“The biggest risk is always whatever no one is talking about, because if no one’s talking about it they’re not prepared for it.” Morgan Housel

“Whenever the market is pointing at something and saying this is a risk to be concerned about, in my experience, most of the time, the risk ends up being not as bad as the market anticipated.” Jamie Mai

“I believe it’s very rare that when you’re focused on a risk that it kills you, because you’re doing something about it. It’s usually what people aren’t talking about that ends up hurting you.” Bruce Berkowitz

“Look at virtually any decade and you’ll see that the most important news story was something no one was talking about until the moment it occurred. If something is in the news, people are thinking about it. If they’re thinking about it they’re at least partially prepared for it. And if they’re prepared for it its damage is mitigated when it arrives. It’s the surprising stuff that really moves the needle and becomes one of the few events you can look back at and say, ‘that was all that mattered.’ Pearl Harbor, September 11th, Covid-19. The most important common denominator of those events isn’t that they were big; it’s that they were surprises.” Morgan Housal

“No one can embrace risk with impunity; it almost always catches up with you. The obvious path to safe navigation is to balance an energetic offense with a strong defense. But in investing, there are no offensive and defensive units. There is no effective way in investing for the offense to scramble off the field and have the defense replace them; you need to excel at both, and at the same time.” Seth Klarman

“Our style is to try to minimize risk in every way we can, and be glad by what is left by way of return. We don’t love risk for the sake of excitement (Some people do). We think of risk as a phenomenon to be watched from afar, like some wonderfully picturesque flaming lava flow from a volcano. It looks inviting and beautiful, but it scorches, if not destroys, those who venture to close.” Paul Singer

“Especially in good times, far to many people can be overheard saying ‘riskier investments provide higher returns. If you want to make more money, the answer is to take more risk’. But riskier investments absolutely cannot be counted on to deliver higher returns. Why not? It’s simple; if riskier investments reliably produced higher returns, they wouldn’t be riskier!” Howard Marks

“At every turn of economic life, the reduction of risk is the key to prosperity. Except in financial markets? Why should it be so?” Andy Redleaf

“Eliminating risk is preferable to finding out where the risk lies.” Peter Bevelin

“Investors are paid for being right, not for the possibility of being wrong?” Andy Redleaf

"You can get paid generously for perceived risk, but you don't necessarily get paid for taking real risk." Wilbur Ross

“I put heavy weight on certainty .. if you do that, the whole idea of a risk factor doesn’t make any sense to me. You don’t do it where you take a significant risk. But it’s not risky to buy securities at a fraction of what they are worth” Warren Buffett

“Risk is not the foundation of profit but its most dreaded enemy.” Andy Redleaf

“You have to be in risk management mode all the time, not just when you might be particularly nervous, because it is impossible to time the transitions of markets to crisis conditions.” Paul Singer

“We have all been taught that earning high rates of return requires taking on greater risks… If an investor can make virtually risk-free bets with outsized rewards, and keep making the bets over and over, the results are stunning.” Mohnish Pabrai

“Risk managed at all times and hedged at all times is the only way to actually control risk.” Paul Singer

“Attention to risk must be a 24/7/365 obsession, with people - not computers - assessing and reassessing the risk environment in real time.” Seth Klarman

"We think vigilance towards risk is the plow-horse to harvesting solid investment returns." Allan Mecham

“I would rather be, you know, a hundred times too cautious than 1 percent too incautious, and that will continue as long as I’m around.” Warren Buffett

"Our appetite is paltry for risky investments, almost regardless of potential reward. Theoretically this stance is illogical as 'pot odds' can dictate taking a 'flyer' - where the potential payoff compensates for the chance of loss - however these situations are difficult to handicap, and can entice one to skew probabilities and payoffs." Allan Mecham

“Risk control is invisible in good times but still essential, since good times can so easily turn onto bad times.” Howard Marks

“Risk control is the most important thing in trading.” Paul Tudor Jones

“Basically if you study entrepreneurs, there is a misnomer: People think that entrepreneurs take risk. And they get rewarded because they take risk. In reality, entrepreneurs do everything they can to minimize risk. They are not interested in taking risk. They want free lunches and they go after free lunches.” Mohnish Pabrai

“We disdain the academic notion than high investment returns can only be accompanied by high amounts of risk. We take the opposite view, that from time to time, the market presents opportunities to earn wonderful returns by assuming very nominal amounts of risk.” Christopher Bloomstran

“In the real economy we see all the time people being paid for hard work, for perseverance, for insight, and for experience. It is easiest to see this by starting with some extreme cases. There are many great heroes among the great entrepreneurs. It is almost impossible to think of one who got paid for taking risk. The more brilliant the entrepreneur and grand his achievements, the less true it seems. Was Alexander Graham Bell paid for the risk he might not invent the telephone? Nonsense, he was paid for inventing it. Was Edison paid for the risk that he might not invent a light bulb, or for actually inventing it? Henry Ford was not paid for taking the risk he might not be able to build a car affordable to “any man of good salary” he was paid for actually doing it.” Andy Redleaf

"I am sure that any competent judge would be surprised to find how little I ever risked for myself and my partners. When I did big things, some large corporation like the Pennsylvania Railroad Company was behind me and the responsible party. My supply of Scotch caution has never been small; but I was apparently something of a daredevil now and then to the manufacturing fathers of Pittsburgh" Andrew Carnegie

"The received wisdom is that risk increases in the recessions and falls in booms. In contrast, it may be more helpful to think of risk as increasing during upswings, as financial imbalances build up, and materializing in recessions." Andrew Crockett

"High risk does not assure higher returns. It means accepting greater uncertainty with the goal of higher returns and the possibility of substantially lower (or negative) returns." Howard Marks

"Any look at the prospect for all types of investments would be grossly incomplete without a careful examination of the risks that one would have to assume to be in the game." Frank Martin

"Baupost, as a long-time participant in the financial markets, has always confronted serious risks. Our ongoing response to omnipresent risks is to attempt to mitigate as much as we can, intelligently and affordably, while willingly incurring only those risks for which we are being well compensated." Seth Klarman

“We have always kept two guiding principles in our risk management approach: 1) Risk management is forward looking so we should be managing risks ahead of time and then making future decisions based on future risk to our capital, and 2) Our primary objective in risk management should be to minimize permanent capital loss plus guard against mark to market losses that are so large that they cause a loss of confidence from our investors essentially making losses permanent.” Ricky Sandler

“What risk means for someone about to retire is very different from what it means for someone in their 20s. What risk means for a bank is very different from what it means for a retailer, and so on. And if risk means different things to different people, the idea that there’s some equilibrium in which there’s a single price for some objective thing called risk is just a mistake. In seeking a profitable strategy, it is important to understand how what you mean by risk differs from what other people mean.” John Kay