Risk Assessment

You're flying a glider toward the gaping maw of a volcano. From a mile away, you can already feel the heat. You see a giant bubble of lava puke from the lid. You do a risk assessment and decide that you want to go home to your washboard stomached pool boy instead of flying forward.

The same transformation happens in the investing landscape. Buying a stock trading at 10 times earnings, which pays a 5% dividend, and you're likely not taking all that much risk (and you won't get much reward). Buy a stock at 40x next year's notional earnings, if it in fact ends up growing revenues 200%, and you're taking a ton of risk. If they miss, their stock gets cut in half.

You have to assess the risks and the timeframes, and think about where you want to roll your dice.