Showing posts with label risk. Show all posts
Showing posts with label risk. Show all posts

Sunday, May 19, 2013

Accepting Prudent Risk

The concept of risk is something survivalists/ preppers are generally adverse to. We like to have this fantasy that we can somehow manage every risk. This is sadly not reality. In failing to acknowledge that risk inherently exists we do not make choices to manage it. Like any other choice when we do not make it the choice gets passed by in an unintentional way. Letting these decisions automatically make themselves can have disastrous results.

The benefit of assessing all the risks of a plan is that you can see the whole picture, weigh things and then make an intentional choice about which risks you are most comfortable making. Inevitably you will try to mitigate these risks and may be successful to some degree.

Let us look at a potential decision and the risks on both sides of it.

Where to live:

Option 1- Live in or immediately near(say 5 miles) a small town. Risk- People and crime could trickle in from town. In a WROL you might get sucked into some sort of tyrannical little fiefdom.

Option 2- Live 50+ miles from town in a perfect Rawlesian retreat. Risk- Earning a living will be difficult and replacing jobs could be impossible. If someone is seriously injured you are way outside of the golden hour. If things go WROL and you get attacked nobody is coming to help.  

Conclusion- The point is that each side of this proverbial coin has risk. Depending on your family, medical status, group setup and finances either answer could be right. What is best for the Smith's might not be for the Johnson clan.

The point is that 1) risk is inevitable and it exists in all choices. 2) By assessing risk you can make intentional choices that best suit your life and 3) Intentionally choosing the risks you are most able to handle (or mitigate in some way) will lead to better outcomes than just watching things happen.

Saturday, November 5, 2011

Crazy Market and Appetite for Risk

I bought a little bit of silver about a week back. I was happy that spot was down a buck, since then spot is down another 9 dollars. I sure bet right on that one. It is probably a nice “dip” if you didn’t blow your wad a week ago like I did. Stocks are down significantly as well. I think it is pretty apparent that Europe is nowhere near done with its fiscal troubles and a Greek default is getting more and more likely.
I don’t know what will happen but we are probably in for a wild ride.

Interestingly I bought stocks awhile back. I do not regret that decision. On the long timeline I am looking at stocks are probably (more so in certain areas) a bargain. However in the short run I do not have a clue what is going to happen. Interestingly a co worker recently bought a bunch of stock on credit in the last couple of days. He figured they will bounce back and he will make some easy money. I wish the guy the best.
That got me to thinking about appetite for risk. There is of course a definite relationship between risk and reward or more accurately put potential for rewards. Also leverage (which we normal people call debt) lets you theoretically raise profits and when it works well it works very well indeed. However when it works badly things come crashing down like a house of cards. Instead of your plan going to heck, your plan goes to heck and now you have to service this debt.

I hesitate to say what is right or wrong for anybody. It depends almost entirely on what you are comfortable with.  I’ve heard it said that if something will leave you up worrying at night you should not put money into it and that makes sense. There is definitely a human component there. I have some appetite for risk as I invest in stocks and relatively more risky areas like energy and in developing markets. However I do it with cash, cash that while it would not be ideal I can afford to lose. Worst case if I take a big hit (especially now while we are relatively young) we call it an expensive lesson and move on.  Personally for me it is about a specific pool of money for a specific thing.  Also since we have some of our bases covered by putting some money away for emergencies and not having debt we have more options and can afford to put money toward something with an element of risk. The money we need to feed ourselves if my income is disrupted is not sitting in some stock that might be wildly down (or up) at any given time.

Sunday, June 20, 2010

This Was Interesting To Read

Canada's economy is suddenly the envy of the world

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