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| *Ostroff, Fair and Company>>>Investing |
Do the biggest risk takers usually make the most money? |
Does it take a lot of risk taking to get ahead or do the more cautious people end up ahead in the long run? It takes calculated risk. Yes, taking a risk is more likely to result in a bigger return (usually), but keep in mind that many people who appear to be "big winners" also experience loss and expect it. Important tip: Winners expect the occasional loss. The fact that they take action is what makes them winners. One marketer and professional author has stated that of 10 infomercials he ran, 9 were total flops. However the 1 that did great, did GREAT! The word risk means something different to the success-oriented. It's not about being reckless, but rather about striving to take action with the goal being to focus on not the win or the loss. Jim Rohn says it best: Be thankful for your results, regardless of what they are. It requires a balance; the highest returns usually come from the "highest risk" investments, over long time periods, but weighing risk is a complex business. For example, which is riskier? Putting $10,000 in a shoebox inside a safe for 45 years? (After which you are sure to have $10,000).....Or putting $10,000 in the broader stock market, which may be worth as little as $187,000 in 45 years (if the market returns less than a third its historical average for that time), but is more likely to grow to $8.5M (!) if things continue as they have for a century and a half! The over-zealous sometimes get bruised a little & then recover, but cautious people always get burned and burned bad! Big risk may allow for great reward, but it is never a guarantee. Unless you have a lot of money to throw around, you will want to start off with something that's a pretty low-risk situation, like a mutual fund of some sort. Once your portfolio is a bit more built up and you have a better feel for investing, you should start to test the waters with something a bit less guaranteed. (If you choose to do so.) No, the biggest risk takers are, over time, usually the biggest losers. There are numerous academic studies that examine asset class returns, and conclude that the 'winners' are those who are, and remain, broadly diversified. No. The most skillful traders do. If you know what you are doing, situations that are sure bets to you look too risky to most amateurs and vise versa. |
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