The art of taking risk

The art of taking risk

The word RISK is like a red siren that warns about danger, loss, disgrace, or even death. It’s fearsome because there’s a level of uncertainty in it, where we might face bad consequences if things don’t run smoothly (read more about the fear of uncertainty). Let’s say if we do something, which leads to either one of these outcomes: painfully stepping on a bear trap OR getting a huge pot of sweet honey. The worst case scenario of painful bear trap might scare you away from taking the risk.

Despite the dark side of risk, it’s quite common in life. We face risk in our career, education, and investment. What matters is how we handle the risk in our hands. So how can we do that?

Risk is often tied to reward. It’s better to take risk to reach for your reward than being too chicken to take any risk to achieve anything at all. The first thing we should analyse is whether the risk we take and the sacrifice we make is worth the end result. Risking your life by swimming across a river with crocodiles just to win a box of candy isn’t that smart. But taking the risk of losing 5% of your money to gain the potential 50% profit from your investment is quite a good idea. In some cases, greater reward comes with greater risk. You might want to consider whether your risk appetite is big enough for the reward.

Is your risk manageable? Is the risk level too high for you? Do you understand your risk well? Trying to earn a degree in your foreign language at a university while you are working part time to support yourself might be too risky (high failing rate). But if you understand what you are doing and the chance of success is fairly high, it’s still reasonable to take some risk. That’s why people always say: invest only in things you understand well. Don’t invest in something unfamiliar and exotic just because it sounds cool, which is like tossing your money into a gambling machine that you have never seen before.

There are cases where old people invested their life savings in something they don’t understand at all. They lost their money in recent financial crisis. I don’t pity them at all because they are so careless and irresponsible with their whole life hard earned money, not just petty 50 bucks! For goodness sake, at least they should respect the money by not throwing so much money into unknown investment scheme (it’s not ignorant. It’s plain stupid). They later asked for their money back (that’s double stupidity).

Do you have enough resources to cope with the risk and make it through all the way till you reach your goal? Some challenging tasks require us to have sufficient knowledge, money, time, energy etc. to complete them. Your risk of dropping out of university in overseas is high when you are poorly funded. But if you are well funded and prepared, most likely you will make it through till you hit success. So do you have the resource cards in your hand?

Taking risk might cause stress due to the possibility of failure. Try not to focus too much on the worst case scenario (failure), which is unnecessary worrying and doesn’t help much. Look at the bright side, such as the success or reward, or the things in between the best and worst scenarios. That should take away some emotional burden off your shoulders. However, don’t be too optimistic that you look only at the rewards and take too much blind risk (that reminds me of some greedy investors), which is quite unhealthy. It’s good to keep a reasonable level of optimism in whatever we do. Not too much or too little.

There are some risks that we should avoid in life, such as the unnecessary risk we take without consciously knowing it. The risk I mean is health and safety risk. Smoking and taking drugs risks damaging the body, and such risk is unnecessary, so why do this sort of things just to make life riskier? It’s also advisable to avoid dangerous sports and jobs that might risk accident in life.

Life can be unpredictable, where unforeseen misfortune might strike us anytime. It’s wise to transfer away some of the risk (at least financially) by buying suitable insurance, which is paying a small price of insurance premium every month so that the insurance company carries some of our life risk and give some protection to us. When shit hits fan, at least we are backed up financially.

We now know more about risk. Can you handle it? Is taking it worth the reward that you are pursuing? Can you make use of risk to your advantage, such as scaring off your competitors who are too chicken to take it, so that you are the only one to pick up the reward? I hope mastering the art of taking risk will bring you one step closer to success in your career, study, relationship, investment, and many more areas in your life.

It’s time to toss a dice and see the outcome.

Tagged as: investment, life, risk, self improvement, tips