Risk: the way to do it... the road to accumulating wealth

[bhoa]

I was talking with a friend who was promoting money or not.and then I made up my mind on what to do a ponzi scheme to me and he made me think for close to two hours whether or not to put in my money. Then I read a post by @shortsegments about the risk Walt Disney took for the realization of Disney Island. McDonald became a reality through a similar risk. I often hear people say take risk and life is a risk. @hokulor claims that he is a risky trader. Some people will say things like” with more risk comes more reward”. Are there other things that come with more risk asides more rewards? Does it come with more peace of mind? How about less mental stress?

What is a risk?

According to the English application dictionary “a risk is the likelihood of a negative outcome”. Cambridge advanced learners dictionary defines a risk as the possibility of bad things happening. Investopedia defines risk as the chance that an outcome or investment’s actual profit will differ from an expected outcome or return. . Let’s keep things simple risk is what is at stake when things go wrong. For instance if you have hundred dollar and you buy an asset with twenty dollar hoping to make profit. There is a possibility that the twenty dollar would yield nothing. Your risk therefore is twenty dollars.
Taking risk can make or mar your business or your life. All businesses have the risk they comes with. You don’t want to take a risk that would move you from being a millionaire to being an ordinary man struggling to survive.
Is there really anything as an ideal risk?
For starters, you must risk to make it in the business world. If you don’t like to take risk then just go back to bed because even your job is also a risk. For me, I feel there is no actual number or percent when it comes to taking risk. I personally feel it’s about your personality and your threshold. I will like to define an ideal risk as a risk that allows you to sleep at night. Once you really don’t care about what happens with the outcome , you can comfortably say you have taken a risk that wont change your status from grace to grass. In essence, whatever you risk should not make you poor as fast as possible. Some school of thought believe that 2-3% of your capital is ideal risk. I agree with this school of thought too. If you can apply this to your business and investments, you would make the best out of it. Risking this way gives you opportunities to try more business idea. Also, risking this way comes with less anxiety. Hence, the need for risk management.

What is risk management?

Risk management is a way of identifying and assessing possible negative outcomes before their occurrence. This assessment is aimed at giving room for business owners to set up plans and procedures to either avoid it or minimize it. I know I said you can’t avoid risk but with risk management you can avoid it to a certain level. For me there are times when I am about to set up a trade and my risk cannot match my equity. For example when trading with small money, some brokers don’t allow micro accounts. What do you do in such situations?Warren Buffet’s shares go for a huge price but if owning one makes you go aagainst your risk management rules, what do you do? Hence, the need to know the way to manage risks

What are the ways to manage risk?

There are different ways to manage risk. However I will like you to look at it in a step wise manner. First and foremost if you can avoid the risk, try to avoid it. Yes, there are riskless investment and businesses. If you can’t avoid risk, then what’s the next line of action? Then reduce it, reducing it means taking an ideal risk. When reducing risk, you should make sure you pay attention to attention to what is called a maximum draw down. If you can’t reduce then try to share the risk. Finally, if you are going to manage risk, have a strategy for managing the risk. That will be a post for another day.

All pictures are gotten from Pixabay

Thank you for reading

Comments

[cmplxty]

There’s always a fine line between risk and reward. Sometimes the risk you take pays off big but that’s fairly rare for most people. I think the average person has maybe 1 or 2 risks in their lives that will bring good returns.

The good returns though are subjective to the person themselves. A good reward to me may not be the same to you.

Still a lot of people should understand the risk scenario so they don’t make foolish decisions in some ways but take healthy risks in others.

[bhoa]

There’s always a fine line between risk and reward.

for me i feel the reward must be way more than the risk. I feel everyone should predetermine their risk anyways. Good contribution. Thank you for stopping . I will be doing a post on risk reward balance

[bhoa]

#posh

[belemo]

Personally, I like to risk what I won't mind losing. It is playing it safe and I don't get to lose too many wounds.
The down side is that the profit isn't usually huge but the positive is that whenever I lose, it doesn't hurt too much

[bhoa]

And you might get a steady reward too... not to big but not at the expense of your sanity

[belemo]

That's the perfect amount

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[bhoa]

You guys motivate the hell out of me .. challenge accepted .. lets see what happens in two days

[hivebuzz]

Haha that is the goal @bhoa! Let's see how long it takes 😉
cheers, liz

[bhoa]

It didn't take two days

[hivebuzz]

👍👍 Great job!

[adechina]

Risk have always been part of my life just that I don't risk beyond what I can lose.

To succeed, risk must be taken towards achieving it but in every risk been taken just like you said, there is a need for risk management.

I have seen many people just take risk anyhow and I begin to wonder what those people think. Try to assess any risk you are taking ignore any risk not worth taken and accept any risk worth taken.

[bhoa]

Nice point.. people need to know what they can loose because after this corona the kind of ponzi that will enter nigeria ehn... let me just leave it at that ..
God bless your hustle bro