The way I personally weigh the risk as far as investment decisions are concerned is by asking myself the questions, 'If i turn out to be wrong, what is the very worst that could happen?' and 'If I turn out to be right, will it make a significant impact in my life financially?'.
Its a buy for me if the answers are;
1. If the very worst that could happen is that the investment tanks, I sure better find an investment that pays me dividends while waiting for the market to reprice it again, presuming the company bought has been assessed and re-assessed to be a great business and unlikely to go to zero. In contrast, going to the casino and making a risky bet involving large amounts where your money can literally go to zero, I personally avoid.
2. There is a high possibility that the investment is a 'multi-bagger' (at the least double, but ideally between 3x up to 10x). Conversely, if the risk taken will not lead to any positive life changing financial impact, then why adopt the risk in the first place?
To be sure, everyone needs to come up with their own model based on their own unique situations.
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