3. Avoid safety. Protect Risk.
Most of us have aversion to risk. It evokes fear of loss. Therefore, the natural tendency is to look for safety. However, there is a trade-off between safety and returns. If you prefer safety, you have to be content with nominal returns.
Without risk, there’s going to be no riches.
In fact, 100% safety is also a myth. Keeping the money under your mattress or in a bank may appear safe. But don’t forget — inflation will erode its value day-by-day. Isn’t this also a form of risk? Therefore, there is no such thing as ‘no risk’ or ‘zero risk’.
Besides, just as a coin has two sides to it, risk too has two sides i.e. threat and opportunity. But there is one key difference between them. Unlike the coin, risk doesn’t always have to be a 50:50 game of chance. You can suitably “control” risk to get more wins than losses.
Instead of hiding behind safe investments, you have to hide behind risk-protection tools. Just as you have safeguards against fire when cooking, you have to build safeguards for risk too when investing; to keep the losses to minimum should the things go wrong.
Most of us have aversion to risk. It evokes fear of loss. Therefore, the natural tendency is to look for safety. However, there is a trade-off between safety and returns. If you prefer safety, you have to be content with nominal returns.
Without risk, there’s going to be no riches.
In fact, 100% safety is also a myth. Keeping the money under your mattress or in a bank may appear safe. But don’t forget — inflation will erode its value day-by-day. Isn’t this also a form of risk? Therefore, there is no such thing as ‘no risk’ or ‘zero risk’.
Besides, just as a coin has two sides to it, risk too has two sides i.e. threat and opportunity. But there is one key difference between them. Unlike the coin, risk doesn’t always have to be a 50:50 game of chance. You can suitably “control” risk to get more wins than losses.
Instead of hiding behind safe investments, you have to hide behind risk-protection tools. Just as you have safeguards against fire when cooking, you have to build safeguards for risk too when investing; to keep the losses to minimum should the things go wrong.
