Subversive tip – Become a risk taker
You can try to avoid every risk, or you can take measured risks and experience the rewards. Taking on risk is a characteristic of successful and happy people. Read on to find out how to take the right types of risks, in your financial and personal worlds.
We’ve all met people who carefully avoid all risks, and end up with a boring, mediocre life with none of the rewards that come with successful living. I used to be like that once, and my life was very beige and dull. Then there are people who are like gamblers, taking on risk without regard for the consequences and ending up broke and broken. The right balance is to thoughtfully take on risks while never gambling on your lifestyle or family.
Being able to take risks comes from having wealth, or at least reserves. You can’t take on measured risks if you are broke and barely making ends meet. You need a buffer to that if your plan doesn’t work out, you can still eat and still have a roof over your head.
You can reduce risks by not putting all your eggs in the one basket. That way, if it fails, you still have options. It only takes one good idea to pay off to make up for the ideas that fail.
You need to choose ideas with a good risk / return profile. If your idea pays off after a year and you will earn $2,000, but you have to put in $100,000, and there is a strong chance it won’t work out, then that is probably not a good deal. You might as well put your money in the bank instead.
I have found that ideas that you understand and have control over are the best ones with the highest chance of being profitable. Any deal when you put money with someone who doesn’t have much idea of business and no track record, or when the deal relies on some sort of “magic” that no-one else understands is not one you should participate in. Actually, one of the best ways is for you to invest in your own ideas. Don’t take on partners unless they bring a lot to the deal – just outsource to others instead.
Here’s an example of a deal that I went into that worked out. I bought an off the plan apartment in Dubai. Dubai was booming (back then) so I went into the deal. I made a few mistakes – one was to do with the tax treatment. In the end, I made enough that the taxation wasn’t a problem. The other issue was that I overestimated the banking system in Dubai. The borrower the developer lined up had a dispute and simply refused to process the loans. In Australia, it would have happened like clockwork, as do most things here. The developer also insisted on payment despite the project running well behind schedule. That spoilt my cash flow projections.
In the end, I was able to finance the property myself and sell it at the top of the market. I made a great profit. The important factor was the risk / return ratio which was in my favour. It was cutting it a bit fine though, and without reserves, the other problems would have made it a bad deal overall. The factors that I didn’t anticipate were the ones that could have spoiled the deal. In any case, in the worst case it didn’t threaten my lifestyle.
The basic principles still apply across every area of life. You can also take on risks with relationships. You can meet new people, trusting in your ability to see their character, rather than sitting at home.
Sitting at home won’t get you hurt, but it is also lonely. By taking a measured risk, you can enrich your life. Sure, you might get hurt from time to time, but you have reserves (emotional resilience and character), so you can afford to take on the measured risk (using your brain to evaluate each risk). If a guy is a crackhead, do you want to have him around? If the person whines constantly as soon as you meet them, don’t you think that might be a sign that they are chronically miserable?
Was this article useful and do you have anything to contribute from your experience? I’d love to hear feedback on how you took a measured risk.
Tags: risk, subversive, wealth
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