What No-One Tells You About Risk

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As soon as we decide to take control of our finances, risk is a word we hear time and again. If we begin investing or taking other opportunities we are more likely than ever to be faced with the word. But what are people really saying to us? On a normal level, we all understand that risk means nothing is guaranteed and that we should proceed with caution. But how do we truly assess it? How do we ensure we are not missing out on opportunities to build our wealth, but also that we are doing it responsibly? There are many formal (and complicated) processes for mathematically calculating risks. But these are rarely helpful to the ordinary individual. By fully exploring your options, you can evaluate risk and establish what you’re comfortable with.

What Are Your Options?

It is particularly important to do our research and assess our options when evaluating risk. If we have the opportunity to invest in a company, for example, we should set aside time to learn all we can. If we have no specific company or opportunity in mind but know we wish to invest, we should thoroughly explore our options. We may be full of enthusiasm and ready to start, so embarking on thorough research can be the last thing on our minds. But while assembling the facts may seem time-consuming, it is minimising our risk. Going into a financial opportunity without all the facts is the same as entering a room blindfolded. Of course we may be fine or even encounter those who will help and support us, but the experience would be better if we could see for ourselves! Take off the blindfold by asking questions and thoroughly investigating the answers. Terms like dividends or income drawdown may seem complicated at first but can be illuminated by research.

What Do You Stand To Gain?

Think carefully about why you want this opportunity in the first place. Do the things you stand to gain excite you? Are they actually necessity or merely luxury? Many of us embark on particular financial paths because everyone is discussing them and so we assume there must be a reason. But not everyone’s goals are the same. Many people have long term goals like pensions and retirement plans. Others need money fast. Never feel pressured to engage in a new plan or activity simply because of outward popularity. Investigate thoroughly what the benefits could be and assess whether they are even benefits you desire.

What Do You Stand To Lose?

This is a question that many tend to skim over when considering something exciting. In general, it is a positive mindset to always look on the brightside. But in financial terms we must be prepared to consider the very worst circumstances. We cannot prepare for something that we refuse to acknowledge as a possibility. We must consider all possible outcomes very carefully, even the most negative ones. If what we stand to gain is worth the risk of what we stand to lose, then great! If, however, even the thought of the best benefits don’t calm our fears of what might happen, then we should listen to our instincts.

Think logically and honestly. Be prepared to do your research and ask around for honest experiences. In no time at all, you will feel knowledgeable and empowered to take control of your finances.

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