What is Risk?

Have been reading alot about the financial markets recently. Many markets are clocking their all time high day after day, bull market is charging despite economy weakening bit by bit. Then there is also alot of talks that it's getting riskier to invest in the stock market at this point in time. Riskier? What is Risk in the first place?

I did a quick search on the web and found the following entries:

- Dictionary.com Unabridged (v 1.1) : exposure to the chance of injury or loss; a hazard or dangerous chance

- American Heritage Dictionary : One considered with respect to the possibility of loss

- WordNet : take a risk in the hope of a favorable outcome; "When you buy these stocks you are gambling"

- Investopedia : Higher risk means a greater opportunity for high returns... and a higher potential for loss.

One common word keeps popping out in the various defination above: "Loss". I would relate it to concept of Fear too.

Investopedia.Com quoted Higher risk means a greater opportunity for high returns. I would relate it to concept of Greed too.

Based on the above definations of Risk, there are 2 issues I simply cannot comprehend, especially in the context of investing: Why will any investor thought of lossing his investment even before he get invested; and why higher risk is related to higher return.

Maybe it's because I have my own defination of Risk. I equates Risk as an inverse to Education. And Education includes "Skills, Knowledge, Experience". The more educated you are in an activity, the less risk you will be exposed to in performing that activity. I deem this defination of risk applicable in all, if not most, of the contexts.
For e.g. Person A and Person B want to perform rock climbing. While A is trained to rock-climb and has a certification for that skill, B is a just-started interested in rock climbing excitist. Suppose both them starts to climb the rocks now, who will you deem as taking more risk in this activity?

Another e.g. A has a driving licence but B doesn't. A volunteered to drives you to your destination and so does B. Based on such available fact, who's car will you like to sit in? A or B? Why?

One more e.g. Person A and Person B want to invest in the stock market. A understands the basic principles of investing, have beening invested in the market for passed 2 years, have tools to analyse companies' strength, weakness, opportunity and threats vs B who is a newbie, recently heard that a bull market is happening and you can earn alot of money from the stock market NOW! Tell me, is investing in the stock market risky or the person who is investing in the stock market more risky?

The contexts presented give you a glimsp of what is risk. It is definitely not an attitude towards loss. Investing is risky? I say not being educated in investing and yet doing it is more risky.

If you have the financial literacy to handle stocks investing (it just an investing tool aka vehicle aka instrument), risk can be mitigated to the minimum.

Placing your money in a bank's fixed deposit is a form of investment too (it is considered an investment as your money are earning more money for you even though you are not working for it). Fixed deposit is just an instrument, an investment vehicle. Many citizens find this instrument especially safe and some deem it risk-free. Why? This instrument can be easily understood! Even my grandma understood what is interest earned over her capital placed with the bank!

It is our Lack of Education (Skills, Knowledge, Experience) that will make our activities risky. Hope this discussion gives you a new perspective to Risk.

Cheers!

"When I Stop Learning, I Stop Living"