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Life is risk!

danger can increase by trying to avoid risk

 

This is one of those hidden investment rules, a secret for wealth creation and wealth preservation.

Everything you encounter has risk. Even during normal activities, perhaps crossing the street or buying food - there is always an element of danger. You can not avoid risk - but you can understand and to varied degrees hedge against it.

Understanding your investment risks is the first step to higher returns.

Safe investments and guaranteed returns are sold as a way to avoid risk. Unfortunately the risk is still be there - but now it is well hidden and harder to quantify.

It is always better to enter a speculation where the risks are mostly known and then manage your risks.

Since life is risk, don't hide from risk, manage risk.

All investment is speculation. What you want to avoid is gambling, if your style is to close your eyes and hope - you are gambling. Successful speculators follow rules and guidelines - their goal is to limit exposure while gaining opportunity.

Brokers, financial advisors, and professors are playing word games that effect your wealth if they pontificate on the wisdom of cautious long term investing.

Learn to guard your own money.

Perhaps you will have ten or more speculations with a ten percent stop loss. Six may lose a bit, some may vary between break even and a double, the remainder may approach a home run or better. Overall you will be a bigger winner than just closing your eyes and investing - and your potential losses will be controlled.

Select your speculations trying to anticipate asset class valuation shifts. keep correlation low, size of any particular speculation small in relation to your portfolio.

One speculation rule is particularly relevant to your personal circumstances:

Wealth is created through concentration - preserved through diversification.

 

Investment for the long term is often a hidden trap. Understand you risks as much as possible, then limit the dangers caused by your exposure.

 

Speculate wisely and grow your wealth.

 

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