There are risks in life worth taking and there are risks that aren’t worth taking. Inevitably some risk is involved if you want to attain the greatest rewards. Moreover, taking risk may lead you to outcomes you couldn’t previously imagine or seem possible. Risk is exciting, it gets the blood pumping and invigorates our daily life. In some situations, risk, and the feeling it gives you, is the reward in itself. Risk becomes more interesting and dynamic when you have the ability to control and adjust your exposure to it.
Family provides great opportunities to explore your personal risk boundaries. There are risks that should be avoided. We embrace risk where we have more control and a clear reward as a result. We tend to shun risk where we perceive there to be little reward, or even danger, especially when we have little control. I find myself, in particular, always trying to manage out low probability but high impact risks where the impact is highly negative yet where I have a high degree of control. I remember trying to convince Alexa that having our infant son outside on the deck in the Rocky Mountains, in the sun, free to squirm and roll around in the pleasant warmth yet exposed to passing hawks, eagles and other birds of prey was one of these risk situations. Low probability that he’d be carried off, yet clearly high impact if it happened; a risk that could be easily eliminated in exchange for a little personal capital (I, perhaps inappropriately, silenced the poking of fun at a new father with a vivid description of what would happen to our new family member if indeed a golden eagle or turkey vulture were to carry him or pieces of him up to their nest to feed it’s family).
Travel provides great opportunities to explore your personal risk boundaries. New experiences, new foods, new adventure, new dangers. When the guide book says the view from the top is grand but “there may be some ladders involved” , your sense of adventure may be piqued. When the park official tips you off that several people have died in the last couple of years going up this route including one time when the entire ladder came loose and fell back, your perception of the risk/reward balance changes. For some (pictured above) the additional information further enhances the experience. For others (not pictured) the new information changes the situation into a high probability, high impact risk situation that can be controlled without any poking of fun necessary. It’s especially easy to choose when the reward (pictured below) for taking the easy route is not that different to that which can be obtained by assuming much, much more risk.
Investing provides interesting opportunities to explore your personal risk boundaries. There are risks worth taking and risks not worth taking. There are risks where you can exercise more control and risks where you have no control. There are rewards to be earned and choices to consider. Most importantly, just as in life, risk in investing is very personal.
Please begin to explore your own personal risk boundaries by taking our Free Personal Risk Questionnaire. You’ll receive a report with the results including bench-marking of your risk profile against others.
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