How do YOU define Risk?

[Bob E.]

Thought I would start a thread to see how different people define risk and take it into consideration.

When I was in Grad School one of the finance advisors, who also manage money for other people, defined risk as "The likelihood of not achieving your goals".  To this day I think this is the single best definition of risk I have heard.

To start with you have to have a goal.  I have friends who will tell me that have money in CD's because they  are afraid of "risking it" in the market or real estate.  In the next sentence they will tell you they are worried if they will ever be able to retire.  This is a classic example of conflicting goals safety vs. return.  It is also a good example of how an over emphasis on safety can guarantee a higher risk of failure (inability to retire).

For me my goal was to get out of corporate America so I quit my job and did rehabs for about a year, then pivoted to notes where, so far, we have enjoyed solid returns.  Is there risk in notes?  Yes!  But we think we have a manageable amount of risk and have established a portfolio so we are comfortable with the idea that if one note goes bad we will still be OK while we work out the issues.

So how do YOU define risk and what factors into your equation.