Alternatives Quote by David Dreman
“A realistic definition of risk recognizes the potential loss of capital through inflation and taxes, and would include at least the following two factors: The probability that the investment you chose will preserve your capital over the time you intend to invest your funds. The probability the investments you select will outperform alternative investments for this period.”
About This Quote
Source Book: The New Investment Superstars by David Dreman, 1992
Risk assessment should consider both capital erosion from inflation/taxes and the likelihood of preserving and outperforming investments over the intended horizon.
In simple terms: Risk includes inflation, taxes, preservation, and outperformance odds.
Key Takeaway
Evaluate both preservation and outperformance probabilities.
Themes
finance
risk management
investment
inflation
taxes
Mood
analytical
cautious
Type
educational
practical
When to use this quote
- investment decisions
- financial planning
- retirement savings
Key Concepts
probability theory
portfolio theory
behavioral finance
Questions to Reflect On
- Do you weigh preservation and outperformance equally?
- How do taxes alter your risk perception?
A Different Perspective
Ignores non‑financial risks like liquidity.
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