In this episode, Robin speaks with Victor Hagani, a financial expert and author, about the critical relationship between risk and return in investing. Hagani shares his personal experience with high-risk investing, including his time as a founding partner of Long-Term Capital Management (LTCM), where a dramatic collapse in 1998 taught him painful lessons about the dangers of excessive risk. He emphasises the importance of understanding risk and its impact on long-term wealth building, advocating for low-cost, passive investing strategies like index funds.Hagani explains how actively picking stocks is one of the most competitive activities in the world, with returns that often fail to beat the broader market once costs are considered. He introduces the "Cost Matters Hypothesis" from Vanguard founder John Bogle, which argues that higher fees associated with active investing erode returns, making index funds a more efficient choice for most investors. Hagani also presents the "Risk Matters Hypothesis," explaining that active investors tend to take on more risk than they realise, leading to potentially lower returns.Through personal anecdotes and insightful analysis, this episode offers valuable takeaways for both novice and experienced investors looking to navigate the complexities of risk and make smarter financial decisions.

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