- Investors shouldn't avoid risk
- Diversify and demand adequate compensation
Attitudes to risk, a concept long familiar to investors, gradually became a political fault line during the Sars-Cov-2 pandemic. Lockdowns were stoically accepted when admissions to intensive care units were sky-high, but the zeitgeist has shifted. Vaccines, natural immunity and milder variants have tipped the balance of public opinion towards libertarianism.
Thankfully, risk isn’t always about life or death, or about whether restrictions on basic freedoms are a trade-off worth making to save lives. Still, questions about acceptable loss, opportunity costs and compensation are part of any decision-making process. That’s especially true of investing; diversification may be the cornerstone idea of Modern Portfolio Theory (MPT), pioneered in the 1950s by Harry Markowitz, but seeking optimal risk-to-reward is a core tenet, too.