Risky Behavior

“When you boil it all down, it’s the investor’s job to intelligently bear risk for profit. Doing it well is what separates the best from the rest.” — Howard Marks

Safety is an illusion.

All of life comes with risk.

You are where you are because of your risky behavior.

Matter of fact, the sum total of life is: Risk Management.

Doing nothing is a risk.

Doing something is a risk.

Getting married is a risk.

Staying single is a risk.

Choosing a particular career path is a risk and choosing a different career path is also a risk.

Believing in God and choosing a particular faith to express that belief is a risk.

Not believing in God and rejecting all religions is a risk.

Bottom line, life is risky. (No risk in the graveyard!)

The world of finances provides a good template to help us see the consequences of risk management in other areas of life.

• Passbook savings = virtually no risk, but your money is losing value every year at a 3-4% clip due to inflation.
• Money Market/T-Bills = very little risk, but factoring in inflation you may (or may not) break even each year. (Call this, “Just surviving.”)
• Invest in the S&P 500 (mutual funds, ETFs, etc.) – short term risk from day-to-day but do this over a lifetime and you have a great chance of averaging 8-10% which turns out to be a great investment. (Call this, “Being able to finance your dreams.”)
• Invest in precious metals (gold, silver, etc.) = you have a lump of metal that gives the illusion of wealth but try buying your groceries or gasoline with a lump of metal.
• Crypto currencies and other highly speculative investments = a black hole of uncertainty (what are they?)

Now, run your other life-choices through that grid. What kind of life are your living?

• Safe but losing ground every day?
• Safe but just surviving?
• Facing manageable risks everyday but building a better future?
• Have an illusion of the best of both worlds – low risk/high return but nothing to really show for it?
• Really risky behavior that may be fun and thrilling with no track record of keeping its promise?

One of those describes your life. They all come with consequences. Are you willing to live with the risk?

The ONE THING for today: There is only one certainty in your life: Death. When you come to the end of your life, will you be satisfied with the risks you took? If so, congratulations! (That’s called success.)

If not, why are you just sitting there? Take a wise risk, jump into life while you still have time.

The quote I used today came from Howard Marks’ book: The Most Important Thing: Uncommon Sense for the Thoughtful Investor (Columbia Business School Publishing)

Photo by Loic Leray on Unsplash