The Chinese word for risk — wei ji — is made up of two characters: one meaning danger, the other opportunity. That’s not just linguistics — that’s life.

What sparked this deeper dive? I recently watched a fascinating video by Aswath Damodaran, “Session 3: Understanding risk - The risk in stocks”. It really got me thinking about how we define and measure risk, especially in the context of investing.

Let’s be honest, risk often gets a bad rap. We tend to focus on the scary stuff, the what-ifs that keep us tossing and turning at night. But here’s the thing: risk is also the price tag attached to anything worthwhile. Think about it – every time you’ve made a leap, whether it was switching careers, taking a chance on a relationship, or even just trying a new restaurant, there was a degree of uncertainty involved. And that’s not a flaw; it’s a fundamental part of growth.

Let’s talk about risk in equity investing for a minute. Now, disclaimer:

I’m not a financial expert. Just a curious person who enjoys learning about markets. So take this as friendly food for thought, not financial advice.

In the world of stocks, one way investors think about risk is through something called Beta. It measures how much a stock tends to move compared to the overall market. A high-Beta stock? Think rollercoaster. A low-Beta stock? More like a calm drive through the countryside.

To figure out if a stock is worth the ride, investors often use a model called the Capital Asset Pricing Model (CAPM). Without going deep into math, it basically tells you what kind of return you should expect given how risky the stock is.

A Simple Example:

Imagine a stock with a Beta of 1.5 (which means it’s 50% more volatile than the market). If the market is expected to give you a 10% return, this stock should offer something more — maybe 13% or higher — to make that extra bumpiness worthwhile.

If it doesn’t? You might be taking on risk without enough reward.

Build Your Own Risk Lens

That’s just one model. A tiny piece of the bigger picture. Your personal risk framework might include:

  • How long you’re planning to invest
  • Your comfort with volatility (can you sleep during a dip?)
  • Business fundamentals (do you really understand the company?)
  • Macro trends, personal gut-checks, and life goals

The trick is to build a system that works for you — one that helps you assess both the downside and the upside.

Risk in Life

Risk isn’t just in markets — it’s in everything we do. And it’s not something to avoid. It’s something to assess, understand, and sometimes even embrace.

Staying in your comfort zone forever? That’s a risk too.
Taking a chance on something uncertain? Maybe that’s where growth lives.

Risk assessment won’t guarantee success, but it does give you clarity — the kind that helps you move forward with intention, not just impulse.

So the next time you’re weighing a choice, ask:

  • What could go wrong?
  • What could go right?
  • And is the opportunity worth the cost?

Because in the end, risk isn’t just about what you might lose —
It’s about what you might miss if you don’t try.

“Only those who risk going too far can possibly find out how far one can go.” — T.S. Eliot