Howard Marks: “Buffett said, ‘I would rather have a lumpy 15% [return] than a smooth 12%.” “Risk is the probability of a negative outcome, of an undesirable outcome. It is not the volatility of the stream.”

For more on one of the most misunderstood concepts in investing:

3% difference on a decade long timeframe makes a hell of a difference

Volatility and risk are not synonymous.

A jagged line can lead upward. A smooth one can lead off a cliff.

I am getting more context from writing the test rules before selecting historical examples. @ArineitweJoe

Redefining risk as probability of loss rather than volatility cuts straight through decades of misapplied finance theory. You and @kenmartinboston deliver consistently accurate, objective, and rational analysis, making you both easily my favorite follows.

But mathematically the volatility of cash flows is risk More volatile cash flows = earnings yield required is higher = return = risk I see his point but cash flow volatility, which could be understood by proxy as share price volatility, does equate to risk in its truest sense