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What Ovens and Risk Have in Common

Remember when ovens didn’t have thermometers? Wait—that was a thing?

Most of us can’t imagine it, but it wasn’t all that long ago when ovens without temperatures were a reality of everyday life.

If you look at recipes from the 19th century, they’re very short on details of actual cooking. Even recipes from the 1930s reference “moderate” or even “slow” ovens.

What is a “moderate” or “slow” oven anyway?

The temperature dial changed everything. Now we know exactly the heat we need to make a loaf of bread, a pizza, or a fluffy meringue. Bakers, scientists, and manufacturers went over decades of recipes and references to moderate and slow ovens and converted them to actual numbers. It’s how 350 degrees became the new “moderate.”

No more guesswork, no more burned loaves, no more uncertainty.

So why aren’t we investing the same way?

The industry uses terms like “aggressive” and “moderate” investing all the time, but other areas of investing always use numbers: asset allocation, the number of shares of stock we own, our rate of return, the points of the DOW…

Why do numbers matter there but not when we’re actually implementing our investment decisions?

That’s why we created the Risk Number.

Everybody’s appetite for risk is different, and “moderate” can mean many things to different people.

Data should influence decision-making. With the Risk Number, we can find an investor’s unique risk tolerance and build beautiful portfolios to match. We don’t have to resort to investor stereotypes.

We use science.

The next time you turn on the oven, think of all the aspiring bakers out there who had no choice but to hope their moderate oven was doing the job, and wonder why some of us still insist on burning our bread because that’s how we’ve always done it.

We wonder how they did it without thermometers back then, but they’ll be wondering how we invested without the Risk Number 50 years from now.

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What is the Risk Number?
Investing is Broken: Stereotypes Don’t Work

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