All courses of action are risky, so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively.
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It is a decision-making tool for risky situations. The main point is that visualizing the worst-case scenarios lets you manage them rationally.
There are 3 stages in fear-setting for any decision:
When things are going well and prices are high, investors rush to buy, forgetting all prudence. Then, when there’s chaos all around and assets are on the bargain counter, they lose all willingness to bear risk and rush to sell. And it will ever be so.
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