One is that it is an abstract number that gives me no tangible sense of the risk in an investment. The other problem is that the ratio as it is commonly calculated doesn't reflect the relative risk of different holding periods. Tom Gardner and other Fools often write that by investing for the long haul we reduce our risk. Risk can mean different things to different people. They just can't stand the bumpy ride.
Risk can mean different things to different people.
They just can't stand the bumpy ride. Others' biggest fear is that they will lose everything and end up broke. That is, what is the chance that after 1 year or N years you will have less than you started out with. That is, what is the chance that after 1 year or N years you will have less than you would, had you invested in treasury bills or bank certificates of deposit. The risk of losing to the Dow index.