For most investors, “risk” is a four-letter word — something to be avoided, feared, or managed away entirely. The industry reinforces this view by talking about risk only in terms of volatility, drawdowns, and probabilities of loss.

But this shallow definition hides a deeper truth:

“Your success depends on the risks you take.
Your survival depends on the risks you avoid”.

• James Clear, author of Atomic Habits.

Both are true. The real challenge is developing the wisdom to know the difference.

The Problem with Fear-Based Thinking

When investors see risk only as danger, they tend to shy away from opportunities that could lead to meaningful growth. When they see risk only as an opportunity, they overreach and endanger their future. In both cases, the root problem is the same as risk is being defined emotionally, not strategically.

The Missing Link: Your Values

Risk cannot be judged in a vacuum. It must be weighed against your personal objectives, which are themselves defined by your values. The “appropriate” amount of risk for you is not the one that maximizes returns on a spreadsheet, but the one that aligns with the life you want.

Advisors Are not Immune

Unfortunately, many financial advisors mirror their clients’ confusion. They talk about “risk tolerance” without truly exploring what their clients value, or they default to a one-size-fits-all definition of “prudent” that ignores individual priorities.

The truth is that this work is not purely mathematical. It is deeply human. It requires better questions:

• What does financial success mean to you?
• Which risks are worth taking to achieve it?
• Which risks threaten not just your money, but your peace of mind?

Honest Conversations Required

Balancing risk in a way that truly serves you will demand open, sometimes uncomfortable conversations. You will need to confront trade-offs, resist the pull of comparison, and look beyond the surface-level numbers.

The market will always throw uncertainty your way. The investors who thrive are not those who avoid risk entirely, but those who learn when to take it and when to avoid it. That clarity comes from your values, agency, intention, and self-knowledge.

True investing is not about avoiding risk. It is about knowing which risks are worth taking.

 

Written by Marius Kilian