But at some point, normal concern becomes irrational fear. And that exaggerated fear keeps too many people from making appropriate investment choices. Investment risk can be an extraordinary stress for many. Others worry themselves sick slowly, over a long period of time. In a society that judges happiness, security, power and prestige by the number of zeros in a bank account, perhaps that shouldn't surprise us.
Money takes on a sacred aura, and a threat to wealth, even temporary, seems life-threatening.
I believe in many cases, risk aversion is a fear of the unknown, a feeling of being out of control, or of not knowing how bad things might get. As we have seen, the conventional wisdom is often wrong. In fact, stocks have been a highly reliable engine of wealth for long-term investors. In this chapter, we will demonstrate that market risk is almost exclusively a short-term phenomenon which falls over time, and that not being part of the market may be one of the biggest risks of all. Even investors who are comfortable with risk will benefit from a better understanding of what it is, where it comes from, how it is measured, and how it can be managed.