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Lesson 10

Risk Management

Risk management is the discipline of avoiding permanent capital loss.

Types Of Risk

Business risk comes from weak demand, poor execution, competition, disruption, or declining relevance.

Financial risk comes from debt, weak cash flow, dilution, or poor liquidity.

Valuation risk comes from paying too much for even a good company.

Permanent Loss

The most serious investing risk is permanent loss of capital. This can happen when the business deteriorates, debt becomes overwhelming, or investors overpay for unrealistic expectations.

RW Finance Perspective

RW Finance treats risk as a living signal. Risk can rise or fall as financial statements, valuation, news, market behavior, and company fundamentals change.

Key Takeaways