He that is overcautious will accomplish little.
-Friedrich von Schiller
Life is about managing risk. People often associate risk with investing, but it actually applies to all areas of our lives. From the amount of insurance coverage we purchase, to the decisions regarding our health, to the area of town that we choose to live in, everything has a level of risk. We can never completely ELIMINATE risk and those who believe that they have may be in for an unpleasant surprise.
When it comes to risk, living in the balance is the most profitable place to be. Gamblers seem to have mastered the fear of losing everything, and often times do just that. Living only for the “here and now” they pay little or no attention to the road ahead, and they suffer the consequences.
On the other hand, those who are overcautious and try to eliminate any and all risk are only deluding themselves with a false sense of control. Trying to squeeze out every possibility of risk will suck the excitement out of life, will cost a lot (insurance), and will minimize returns (investing).
Our most enjoyable, fulfilling, profitable, and productive life lies in our ability to manage risk. Whether it is leaving a dead-end job to do something that you have always dreamed of, purchasing a convertible, raising your deductible, swimming in the ocean, or saving for retirement we have to accept that there is some amount of risk involved.
In life we can miss out on so many wonderful experiences because of fear and our unwillingness to accept any risk. When investing for retirement our risk level determines whether we don’t retire, retire in style and everything in between. The overcautious investor who refuses to invest in stocks and only invests in CDs or savings accounts will end up with a fraction of what the balanced investor will have in retirement.
del.icio.us Tags: risk taking, investing, insurance
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