#Collaborative post
If you want to grow your pot of capital, you need to take some risks. It is inevitable. If you allow money to rot in a bank account, it will lose value and eventually you’ll find yourself out of pocket.
But when it comes to risk, how much should you take? Should you go all-in like a lot of people do? Or should you stand back a little and be more cautious, seeing how things play out before dumping your life savings into a scheme?
That’s the topic of this post. We look at why you should be a bit of a risk-taker and some of the consequences that can come with it.
Why Be A Risk-Taker?
In an ideal world, people would pay you interest on your savings automatically and you’d always get paid. And sometimes that’s possible if you buy government bonds.
But if you actually want to make a half decent return on your investments, you need to take some risks. Yes, stocks and real estate will decline in value sometimes, but that’s part of the process. On the flip side, the upside is much higher. Sometimes, you can achieve breakout returns.
Furthermore, taking risks opens the possibility of becoming financially free. Once you make a series of a few successful investments, the world becomes your oyster and you can live your life on your terms.
Why Taking Risks Is A Double-Edged Sword
With that said, taking risks is a double-edged sword. Things could go well for you, but that doesn’t mean they always will.
You’ll want to consider multiple factors before deciding how much risk you’re prepared to put up with. One thing to consider is your risk tolerance: how much sleep are you willing to give up at night if the market suddenly collapses on you?
Occasionally, you will lose a lot of money. That’s just the way the game goes. In the first half of 2022, most investors in the stock market saw losses amounting to 10 to 30%, which is a lot when you’re watching your assets crumble before your eyes.
However, those losses soon recovered, and by the middle of 2023, most investors had made back most of those losses and earned a little extra on top, just for staying in the market.
When taking risks, you’ll also want to consider whether you have a sufficient financial safety net to support you, even if you lose everything. Do you have sufficient funds to weather random problems that might come into your life, such as the boiler breaking down?
You also need to be careful that nobody identifies you as being someone who is breaking the law. Don’t do anything that might be considered illegal. While a fraud solicitor can help you fight charges, going to court is something you’ll want to avoid.
When taking risks, educate yourself about the market. Know what you’re getting yourself into. Never fly into a situation blind, thinking you know what to do, even if you don’t.