Risk vs Loss

Risk vs Loss

1) Just because there was no loss experienced does not mean there was no risk

2) You drive a car at 200 km per hour and safely reach home

3) Your car has no Air Bags

4) Your brother drives his car too at 200 km per hour and reaches home

5) His car though has the best airbags

6) Your car costs Rs 10 lac and his Rs 20 lac

7) So your returns are better because you reached at the same time with the same speed but with half the amount of investment in the cost of the car

8) Now here is the lesson on Risk that you need to keep in mind

9) Just because there wasn’t any loss does not mean there was no risk

10) Just because the risk apparatus was not deployed does not mean there wasn’t any risk

11) All insurance products are based on these Principles that Risk always exists but loss may not happen

12) When you invest in multi asset automatic rebalancing funds, your performance may suffer as compared to a pure equity fund

13) But that’s because the loss never occurred despite the presence of risk

14) Such funds are like Equity Funds wearing clothes of Insurance

15) You are guaranteed to sleep well

16) Be healthier

17) Live longer

18) And then suddenly the Rs 20 lac car’s returns seems better than the Rs 10 lac car’s returns

I rest my case