I decided to ask a more financial question today, I’ve been doing more of the soft skill questions lately. Whether you’re a statistician and know you want to stay away from the ends of the bell curve. Or in biology, we would call it achieving homeostasis. Pick whatever analogy you’d like.
When it comes to your money, do you want to put it all in the market to have the greatest chance for growth? Do you want to put it all into insurance so you’re guaranteed to never lose? Or are you somewhere in the middle?
Here’s a little thought exercise: You have $100 in the market, and the market drops 50%, how much money do you have? $50. The next day there is a wild recovery and the market shoots back up 50%! How much money do you have now? $75. Think about that for a minute.
It’s better to not lose than it is to chase the rate of return as a single strategy. It’s interesting that you’d have to have a 100% rise in the market just to return to equal. This is why financial planning and financial success are about finding that balance by doing some things that are safe and some that are risky. Having intention built-in instead of crossing your fingers and hoping it all works out.
So what way do you prefer to go? The risky route? The safe route? or somewhere in the middle? I look forward to hearing your answers. Let me know below.