WHAT RISKS SHOULD YOU BE TAKING WITH YOUR MONEY?




"All dreams can come true if we have the courage to pursue them." Walt Disney

I made my first stock investment at 22 in Ramtron Semiconductors. I had no idea if I made or lost money on it but I was hooked. My branch out into real estate came with successes in the UK and some hard knocks in Florida.


The gains and losses I experienced along the way have helped me create a structure to assess whether stocks, business, or a piece of real estate is right for me.


Your structure will be different than mine but here are some initial broad risks to consider before considering some of the finer details...


CREDIT RISK

Will the company stay solvent, will the entrepreneur stay the course, will the investment manager be honest? Before jumping into an investment, consider how much experience the team has - even if that team is you.


We don't know what we don't know.


Consider the reputation of the managers. Invest in things you understand and enjoy reading about so you know when to call bullsh*t. For me, that's saying no to investing in things like biotech companies - an area which I do not enjoy learning about - became as important as going for it.


LIQUIDITY RISK

Liquidity is the amount of time it takes to liquidate an Asset and turn it into cash. If you are not able to Sell an Asset whenever you wish to, it holds liquidity risk.




Know what you are saving for and match up the parked money with the Asset's liquidity risk.


Cash & Government Bonds - generally hold little overall risk as does Whole life policies held by AAA-rated companies.

House - generally holds a medium risk, but your perception of the location - deteriorating or up and coming - will influence your feelings about the risk.

Collectibles - including jewelry, art, wine, and vintage cars. These markets are inactive and hard to value or predict price or length of time for sale.


INTEREST RATE

The movement of interest rates upward can make it more expensive for investors to borrow money to buy your Asset or make other investments more attractive.


This could decrease the value of your asset.


Corporate bonds generally carry more risks than government bonds. Government bonds are only as safe as the government has the ability to repay them.


CURRENCY RISK

Currency risk takes into account all the world's political movements. This makes it very hard to assess - but it's important to be aware of it!


I sold my flat in London in 2004, converted that money back into USD, and received $190,000. For every GBP £100,000. Politics elude me.


That was luck and a reminder for future endeavors.


Calculated Risk is about taking the risks appropriate for you at the time of your life you are experiencing.


Remember: life is not linear.


Takeaways for your money risks ⏤

  • Take the time to understand what the related risks are to any investment you consider

  • Assess your physical and mental condition and current demands on time and energy

  • If you decide to go ahead, then you are taking a calculated risk

  • If it is something you want but are not yet prepared for, record the goal along with what you would need to start and begin to work towards starting the goal.

If you need help igniting the risks you should be making with your money consult our wealth coach.