Chapter 3: Why I Focus on Risk First – And Let Compounding Do the Rest

This is Chapter 3 of my book Mastering Value Investing: Practical Strategies for Real-World Results. Go there for links to the other chapters.

Most investors think risk means volatility. They are wrong. The real danger in investing is not price swings – it is permanent capital loss. And once your capital is gone, compounding stops forever.

In this chapter, I challenge one of the most common myths in investing: that higher returns come from taking more risk. In reality, the investors who survive and compound wealth over decades are those who focus on what can destroy them first.

You will learn why market volatility is not the enemy - but leverage, concentration, weak balance sheets, and emotional decisions are. Price fluctuations create opportunities; bad businesses, excessive debt, and forced selling create disasters.

Intelligence does not protect you from risk. Process does. You will also see why writing down your investment process matters more than finding the next “great stock,” and how disciplined investors decide when to hold, when to cut losses, and when to rebalance - without emotion.

This is not about chasing market highs. It is about avoiding irreversible mistakes. If you understand how capital is lost, you dramatically improve your odds of letting compounding do its work—quietly, relentlessly, over time.

This chapter breaks down how disciplined investors think differently.

🔒 The full chapter goes deeper, including the complete framework, filters, and decision rules. Access requires a password (available to subscribers).

👉 Subscribers only. Click here and enter your access password. New here? Sign up to receive your free access password.

END

Disclaimer & Disclosure

I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.

Your link text