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Price Risk vs Information Risk

August 21st, 2019 by dimpledbrain

  1. Most retailers confuse the concept between price risk and information risk
  2. Information risk means how much we know about an asset, example a publicly listed company
  3. If we know a lot about a company, we say that the information risk is low
  4. When retailers try to ‘research’ for more information about a company, the thinking here is to mitigate information risk
  5. However, the one factor that makes you money is price risk.
  6. The higher the price, the higher the price risk
  7. The golden rule to make money is Buy Low Sell High. Always. The second golden rule for the pro is Buy High Sell Higher. I do not know any other rule to make money than this.
  8. Price risk and information risk are inversely related, the more information is available in the market (and hence lower information risk), the higher the price will be (more premium attached to it and hence higher price risk)
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