 Good day, fellow investors. One of the most important things to understand in order to be a successful investor is the difference between risk and uncertainty. The investment community analyzes risk from a wrong perspective. They see risk as volatility. However, your heart is volatile, but if it stops, then things become risky. The same thing is with stocks. They are always volatile and will always be considered risky. However, risk is not volatility, risk is a function of price. The higher the price in relation to the fundamentals, in relation to the earnings, the higher is the risk. It doesn't matter if the stock is volatile or stable. The risk is a function of price, especially in the long term, not volatility. On the other hand, the market sees uncertainty equal to risk because if a stock, let's say, can have earnings of $2 next year or $1, analysts cannot decide between that and they describe the stock as extremely risky and usually a stock then has a price to earnings ratio of 10 because everybody expects earnings of 1 in the future and don't really see that too potential because it's uncertain. However, in the worst case scenario the stock will have earnings of 1 and in the best case scenario the stock will have earnings of 2. Earnings of 1 lead to price earnings ratio, let's say, of 10, earnings of 2, price earnings ratio of 5, but if a company grows to 2, then the price to earnings ratio usually goes to 20. So there is huge potential upside with low risk if you can differentiate between risk and uncertainty. So the key is to see, okay, what's the worst that can happen? That's the risk. And if there is a plethora of possibilities of better scenarios that can happen, that is uncertainty and that's something you have to take advantage when investing. I'll show you an example to clearly elaborate on what I mean. Now this is the stock chart from Apple for the last three years and you can see that the stock is up 56%. However, the stock has also almost doubled from April 2016. What was going on in April 2016? There was huge uncertainty related to Apple, but the price earnings ratio was below 10, Apple was paying a dividend, growing its dividend, revenues were stable, a little bit declining because of slower sales, but they still had a huge customer base, a good product, really a brand and everything. So the risk was really, really low. Plus they had a lot of cash which really gave protection to the stock price and the stock price was really, really crazy low. Of course, I bought at those prices. However, there was negative sentiment because there was high uncertainty. Carl Icahn was just selling his stake in Apple. He had made some money on that. Nobody knew what will the next iPhone 7 look like, what will be sales and there were also negative sentiment surrounding the capabilities of Apple's CEO. So on one hand, you had a company that didn't grow for a year. Everybody was panicking about sales, about the new Samsung destroying Apple sales. However, Apple had a really strong brand, a lot of money. Everything was good from a fundamental perspective. However, there was future uncertainty. Nobody knew if revenues would stay flat for the next three years or if revenues were about to double or triple. You never know. So there was practically no risk when investing in Apple at 90 with a lot of upside. And that's why you have seen Buffett investing heavily in the stock in the past year and a half. So the market perceives that as risk, uncertainty, risk, volatility, lower stock price, sell, sell, sell in panic because they don't understand between uncertainty, which was high with Apple, but the risk was very, very low. And Apple has been one of the best investments in the last year and a half from a risk reward perspective. What's the current risk, reward, uncertainty and risk in the market? As I have said, there is a big difference between risk and uncertainty risk. The higher the stock prices are. And we have seen very, very high stock prices in the market now, which means that the risk is high. However, the uncertainty, is it high or low? The market doesn't see it. The market doesn't see the risk and everybody's complacent and happy. I see high prices. I see high risk. Nevertheless, the market doesn't see that. Here is the smoothed US recession probability that there will be a recession. As you can see, it's usually close to zero. And only when a recession happens, it goes higher, the probability of a recession. This shows that it's impossible to time a recession. And nobody usually sees a recession coming until it actually happens. So that's a big surprise for everybody then. So uncertainty for the market is low, and therefore prices are very, very high. The VIX index, low uncertainty, everything is going on. Everybody expects the economy to continue to grow. And things look really good on a global perspective. The VIX index is very, very low. However, only when there is trouble, like it was the case in August 2015, when there was a supposed alleged crisis in China, then it quickly shoots up. But that's usually after something happens. A look at prices, valuations, the cyclically adjusted price to earnings ratio is double the historical average as 33.67 now, which is higher than Black Tuesday in 2029, is not yet higher than the dot com craze. But you can see what are the long term returns when the cyclically adjusted price to earnings ratio is this high. So I'm practically saying that there is huge certainty that long term returns will be negative. And the risk of investing now in stocks is extremely high. So what do you have to do? You have to look, okay, what's the risk and what's the uncertainty and invest in stocks that have high uncertainty levels. Nobody knew in 2009, when there will be a reversal, when the economy will pick up again, and things will do fine. However, it was practically certain that things will improve, the governments will intervene. We are human, we always get our way, we always grow after something happens. So there was practically no risk in investing. However, everybody was selling because there was high uncertainty. So investors hate uncertainty, because they're equalized with risk. And that's something we should not do. I will continue to look at high uncertainty investments like the food industry, seafood industry that we have been talking about low risk due to strong fundamentals. Thank you for watching. Give us more example in the comments of high uncertainty, low risk investments, we'll take a look at them. So leave your comments, then click like, subscribe, and I'll see you in the next video.