first, you should use separate performance benchmarks for each bucket; and, second, you should measure progress to your goals in terms of the assets you have accumulated for each goal and your probabilities of achieving success.

Therefore, investments allocated to the personal risk bucket will be selected to limit the loss of wealth but will probably yield below-market returns. Allocations to the market risk bucket will provide risk-adjusted market returns, in accordance with the diversification principles of modern portfolio theory. Finally, allocations to the

The larger context is likely driven by recent performance, with a focus on volatility as the risk measure.

At least initially, all of these paths to great fortunes were idiosyncratic strategies that involved monetizing their brain power, knowledge, and expertise (that is, their own human capital and that of their employees) through the use of two potentially perilous elements: leverage and concentration (along with hard work and lots of luck, of

Cash is, simultaneously, an angel of safety in the short term but a devil that drags down your returns in the long term.

“animal spirits”: our propensity to make decisions based on a “spontaneous urge to action,” in Keynes’s words, rather than on a careful consideration of weighted probabilities, as rational economic theory would suggest.

objective-driven investing.

The way to get a handle on your goals, then, is to make a list; categorize them as essential, important, and aspirational; and quantify the cost by deconstructing each one into a series of cash flows.

Of course, you may come across or already own an asset that has a lot of risk but very little return potential. The solution in most cases is simple: sell it. Similarly, you may be very lucky or smart and conclude that you have an asset with very little risk and a high return potential. But, unless you are truly an expert investor with specialized