Calculating Risk Foolishly, Vol. 4: ETSY v. DUOL

**David Gardner** (0:00)
Risk, a lot of people talk about it, but especially in the investment world, I've never found that talk very satisfying. First of all, how do you, how do I, how do they define risk? What does it mean even to say that's a risky stock? The definitions are often unclear. Then some professional analysts in the risk section of their stock research will say stuff like medium, as in this is a medium risk stock. What does that mean? Well, more than a decade ago, I developed a 25-point risk rating system that I've used as a Rule Breaker Investor ever since. First off, I defined risk. Well, at least what that word means to me as an investor. Then we went on not just to put a word to the riskiness of the stock, not just a word like medium, but to go on to put a number on that stock's risk, a number to give you a much more specific understanding. That number is itself based on 25 questions asked of each stock. You know what? We're going to cover the whole thing this week. Joined by my two Motley Fool friends, Alicia Alfiere and Yasser El-Shimy, we three are going to teach you the entire system, help you rate stocks yourself along this very important dynamic of risk. Only on this week's Rule Breaker Investing.

**SPEAKER_2** (1:29)
It's the Rule Breaker Investing Podcast with Motley Fool co-founder, David Gardner.

**David Gardner** (1:37)
Welcome back to Rule Breaker Investing. This week, joined by two Motley Fool experts, two friends, we're diving into assessing investment risk using my 25-point risk rating system. Now, risk in equity investing, as I define it, is the potential loss of a substantial portion of capital over a significant period, like, let's say, three years. Understanding this risk at both an individual stock level and also a portfolio level is crucial. And my framework, which was created to provide clarity in risk assessment, moves away from vague terms like medium risk. It's a system, and it's straightforward. So, we're going to ask 25 yes or no questions about a stock with no indicating a higher risk. Each no adds a point, making the higher the score, the higher the risk. And by the way, I love yes and no questions. I mean, the easiest best tests I ever took were not multiple choice, which is itself easier than short answers, but instead just a binary yes or no thumb up, thumb down, and that's what we do with our risk rating system. So again, each no adds a point, higher the score, higher the risk. And this approach is not just for individual stocks. You could also apply it to entire portfolios by calculating the weighted average risk score of your holdings. So this method also challenges the conventional belief that high risk equates to high reward. In fact, my own experience has sometimes found that lower risk stocks can offer greater returns, which by the way, is a truly rule breaking assertion. Now let's delve into this system with my fellow fools, Alicia Alfiere and Yasser El-Shimy Fools. Welcome.

**Alicia Alfiere** (3:35)
It's great to be here.

**Yasser El-Shimy** (3:36)
Hi David. I'm happy to be here.

**David Gardner** (3:38)
Alicia, let me turn to you first. What are you working on these days for our members around The Fool?

**Alicia Alfiere** (3:43)
Yeah. Well, I'm on the Rule Breakers and Supernova Phoenix teams.

**David Gardner** (3:47)
I'm really excited to hear that. I think I told you this ahead of time. My next question for you, you don't have to answer Supernova if it's not your best answer. Alicia, what is the best thing that's happened to you so far in 2026?

**Alicia Alfiere** (4:02)
Well, the best thing so far in 2026 is that I've started swim lessons with my 10-month-old daughter, and she is the splashiest baby in the whole class.

**David Gardner** (4:17)
Is splashy in this context awesome or is it a problem?

**Alicia Alfiere** (4:22)
It's awesomeness and the amount of water that you move around.

**David Gardner** (4:27)
I love that you're doing that. That is fantastic. Alicia, slightly more seriously, what company will you be bringing this week and maybe just a couple of sentences explaining the business?

**Alicia Alfiere** (4:38)
Yeah. Well, today we're going to talk about Etsy. So ticker ETSY, the two-sided marketplace that helps craftspeople connect with buyers and the company also owns D-Pop, which is a fashion resale platform.

**David Gardner** (4:51)
Thank you very much, Alicia. Looking forward to getting into Etsy with our 25 yes or no risk rating questions. Now let me turn to Yasser El-Shimy. Yasser, what are you working on around the pool these days for our members?