Howard Marks: Volatility does not equal risk

Howard Marks, the Chairman of Oaktree Capital revisits and extends his previous memos on the subject of risk. Marks says “while volatility is quantifiable and can be an indicator or symptom of riskiness or even a specific form of risk – I think it falls far short as “the” definition of investment risk. In thinking about risk, we want to identify the thing that investors worry about and thus demand compensation for bearing. I don’t think most investors fear volatility. In fact, I’ve never heard anyone say, “The prospective return isn’t high enough to warrant bearing all that volatility.” What they fear is the possibility of permanent loss.” Full PDF is available here: (VIEW LINK)