Risk Management Articles

Almost everything written for retail investors is about picking winners. Risk management is the much smaller body of work about what happens when you are wrong — and since you will be wrong regularly, it is the part that determines whether you are still investing in ten years.

The through-line in these guides is that risk is a decision you make before the trade, not a reaction you have during it. How large the position is, where the exit sits, and how much of your portfolio rides on any single outcome are all set in advance, in a calm moment. A rule invented while staring at a loss is not a rule; it is a rationalisation.

One theme recurs often enough to state plainly: the mathematics of recovery are asymmetric and brutally unforgiving. A 20% loss needs a 25% gain to break even. A 50% loss needs 100%. An 80% loss needs 400%. This is the whole argument for caring about drawdowns rather than only returns, and it is why position sizing does more for most portfolios than any amount of stock selection.