• Warrick

You can't run from risk

Is any decision risk free?


Hello fellow Protagonists,


Today is the day we start to change our views on risk.


If asked, some people regard themselves as risk takers. They love stories of the underdog when the odds are stacked against them and where the reward could be huge. Other people may see themselves as more reserved or even risk-averse. They may stick to what they know and like to protect what they have. We will all have different feelings when we think about the word "risk".


The truth is that we are all risk takers as there is no way to escape risk. It is impossible to not take risks in life. We are all in the same boat with this one adventurers and let me explain why.


In any situation, even doing nothing is a risk.





A classic financial example is investing in the stock market. Of course this has its risks because your money can drop as well as increase. Picking single stocks in a company that goes on to file for bankruptcy could see you lose it all.


The point is, if you have not put your money into the stock market then you must have done something else with it. You couldn't have done nothing because even nothing is something.


If you spent it all on new clothes and nice food then you run the risk of potentially not having any investments to pay for your future lifestyle or missing out on additional wealth creation. If you keep your money in a savings account then your risk is at the mercy of interest rates against inflation rates. Doing nothing with your money has risks just like investing it.


If all actions are risks then we can base our decisions on the risks we are willing to take.


Let's say you are thinking of leaving your job. The same rules apply here as leaving your job has risk attached but so can staying in your current job. The grass isn't always greener on the other side, that is true, though you may be missing out on a job that provides you with experience for great personal growth, better policies that support your home life, new friends, or a higher salary.


We need to be comfortable with the permanence of risk to then be able to pick our risks rather than run from them.


This would also mean that nobody is technically completely risk-averse.


It is the perceived level of risk that differs, not the risk itself. Some choices are definitely riskier than others. Sticking a fork into an electrical socket is riskier than crossing the road but the person who crossed the road may get hit by a car and die, where the socket forker gets a nasty shock and is otherwise fine. It's the way life can go some times.


Some risks are also just not worth the reward in our minds. Like selling your house, flying to Vegas and placing it all on one spin of the roulette wheel. Technically not doing this is a risk as well as doing it (though not recommended). This did actually happen and surprise surprise the dude was English!





This isn't a realisation to alarm anyone. It means you have lived your entire life so far with risks all over the place... And you are still here to read this post. Good going!


We are all risk takers and there is nothing anybody can do about it.


I have added this post in before the next Mindful £100K post because risk is a key part of it - Pensions and Investments.


GLHF


Warrick


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