A Wealth Blog Mini Series
Everyone wants to win. But not everyone wants to bet, and there lies the difference. It is understandable that most people want to win without betting. It is within our age old teachings that causes this way of thinking. We are taught that risk taking is a foolish thing to do.
All of life is a gamble whether you see it that way or not, but it’s a realistic truth. Most people who understands this usually tries to find ways to place as few bets as possible. But there are a few who take on the opposite route and rather take risks head on and figure out how to exploit it and manage it. These are the people who are likely to become a part of the 20% of Pareto’s 80/20 Principle described in the blog The 80/20 Rule: Not Just About Smarts and Looks.
This blog mini series is about taking risks in its broadest sense. References to currency and speculation in the stock market will be used often, but the same rules apply to other markets such as real estate, art and/or antiques, metals, etc., and even life itself, if you shift your paradigm to see it.
To make any general gain in life, whether if it’s a gain in wealth, personal status, a dream job, and so on, you must risk something. That something could be material and/or emotional. For example, a commitment of money, time, knowledge, love, etc.
With that said, it only makes sense not to stay away from risk but to expose yourself to it. Not in a mindless way though, but with a lot of care and thought. To take risks in such a way that large gains are more than likely more than the losses. In essence, to bet and win.
To do this we will take a look at “philosophies” or rules that are part of the formula to taking advantage of risks and gaining rewards with limiting the losses.
Many of these rules may seem shocking because most of them go against most investment advice that are usually given out by advisors. But, keep in mind the 80/20 Principle, and if you don’t want to be like the majority, think and do things differently. These are methods to wealth, in gaining money and/or more importantly, in life. Enjoy!
“In this game, worry is not a bad thing, but a positive one. If you are not worried, you are not risking enough.”
Most people want to feel secure in their life. People jump to take grasp of that cozy feeling of tranquility and security. This is because of how fear has evolved. Fear came to be perceived in a way that it affects us negatively mentally and psychologically.
These days psychiatrists and psychologists would consider being calm, tranquil, and without much worry as being a good, normal state. In result, teachings of how to stop worrying, to be tranquil and calm has been enforced in order to live a so called normal life. Therefore, this has been accepted by many as being the way and the truth. The blog post You Afraid? Deal With It! goes more into detail about fear and gives you practical idioms to live a fearless life.
The philosophy of the rules of risk and reward is the exact opposite of this way of thinking and living. If your main goal is to evade worry and be fearful, you are likely to live a poor life in wealth and in other aspects. For example, love. If your are afraid to commit yourself to someone and take personal risks, you will never fall in love.
Let’s take a look at putting your money into a safe interest bearing savings account. Even when interest rates are high, you deposit $100 into it at the beginning of the year. At the end of the year it grows to $110. Big deal. Realistically, that gain is taxable, then what’s left after accounting for things such as inflation? You don’t take risks, you get little reward, if any.
Looking to get wealthy off of a salary income is merely impossible. With the way of how the world’s economic structure is rigged, the odds are stacked against you. You are more than likely going to become a part of the working class majority (80/20 Principle). If all you seek to do is have a home and food on the table, even that is not guaranteed as evidently seen during this economic crisis (2010).
Of course taking speculative risks works both ways. It can make you rich and it can make you poor. With that said and considering how the odds are stacked against you anyway in this worldly economic structure, what difference is it going to make in your financial status if you do get a bit poorer while trying to get rich.
But, with knowing the rules of risk and reward, the odds are in your favor to make gains rather than losing. It is a ways to go further upward than downward. With the potential gain way bigger than the potential loss in this game, more so the odds are leaning in your favor. Just shift your paradigm follow the rules.
Understand: making any kind of financial gain involves risk no matter what medium you use to attempt to make a gain. Nothing is guaranteed. It is about probabilities and managing your risks. Some people relate speculative risk taking, investing in the stock market, real estate, arts and antiques, etc., to gambling. Yes, it is much similar. When gambling you are likely to be the one betting against the house. In that case the odds are against you no matter what, unless if you were to cheat or exploit some kind of edge such as card-counting in blackjack. The way to think is in terms of being the “house” and finding those edges. That way the odds are in your favor. That’s the way and philosophy the Rules of Risk and Reward takes on.
End of Part One