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Investment Series : Risk Free Investment Methodology
For a millennium, mankind attempted to define and measure risk.From the early days of Pascal and Golton to the modern forerunners in academia,defining and measuring risk has been a relentless pursue. Until we properly define andmeasure risk, there seems no way to mathematically defeat risk, creating risk freefinancial markets and economies.Mathematics opened up a new door for mankind with the invention of probability study.Mankind started using probability studies in real life statistical research in the 1660s,starting with a man called John Graunt. Gruant’s methods evolved through many handsinto what insurance companies of today still use to calculate insurance premiums. Eventhough probabilistic study is a useful mathematical tool for defining the probability of theoccurrence of several outcomes, it has certain flaws. Flaws rendering it useless in helpingthe world prevent or predict the Great Depression and the subsequent World Wars andeach market crash that followed. Probability has 2 major flaws; Firstly, probability is based on each outcomes being mutually independent and random, resulting in a normaldistribution and secondly, probability cannot take into consideration more outcomes thanwhat was taken into consideration! Yes, that’s what we all mean by being “taken bysurprise” isn’t it? Mankind has indeed been “taken by surprise” more times than we arewilling to admit.Because new information and new outcomes cannot be predicted, no studies dependingon past results and occurrences are valid in the face of new information. That is whyinvestment reports always states “past results do not guarantee future performance”.Uncertainty is the main component of risk. Treasury securities are so “risk free” becauseit has a high certainty of performance.However, risk is not only uncertainty of outcome but also the consequence of outcome.Too long has mankind defined risk based on the probability of occurrence without takingconsequences into consideration! Uncertainty is the engine of risk and consequence is theend result of risk. Consequence of risk truly defines what is risky and what isn’t!I define risk as the possibility of a catastrophic loss.We live in a risky environment all the time, almost everything we do is risky but we do it because the possibility of a catastrophic loss is small or that the negative outcome cannot be regarded as catastrophic.This brings us to the true nature of risk; Risk is different when regarded by different people. To some people, a 20% portfolio loss is acceptable while for some other people,that same 20% portfolio loss is catastrophic! When an investor is able to define whatconstitutes a catastrophic loss to that particular investor, the investor will be able to usemodern risk prevention tools to create totally risk free investment portfolios!
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riskfree

The Holy Grail to Investing. The utlimate business solution. The ability to cut the cost of any business expense, or just plain invest. Developed multiple arbitrages for the financial markets. Arbitrages that produce just a few percent a year, to arbitrages that produce over 30 percent a year. In 2001 i started developing, as of now, a dozen arbitrages. I lock in an X percentage, and Y time later, i close out the arbitrage. Over 30%/yr. Risk-Free Investing is not only possible, but in abundance. Just that people are told and taught that it is impossible. No risk has been in front of all, but not seen. The market is unlimited. I'm interested in selling, or partnering to sell, or partner in a business that uses my arbitrage. Thomas 352-283-3326 HolyGrailToInvesting@hotmail.com

reply09 / 18 / 2009
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