Sim Kee Boon Institute for Financial Economics at SMU research fellow Hamish Macalister noted that very few people have a strong grasp of what investment risk means. He said that assessing risk when making an investment is hard because our brains have developed pattern recognition skills to such an extent that we see patterns where they do not exist. In sum, the world of institutional investment maintains teams of individuals attempting to measure risk with all manner of extremely complicated and esoteric mathematics. For the individual investor, it is critical to be aware of the pitfalls of common risk measures and bear in mind there is no such thing as a risk-free return.
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