Risk it for the biscuit? - March 2024 (#12)

Hello again dear reader! Back at you with part DEUX of the three part series on what you should consider before investing. Your dude Brent is going to ask you to get real with yourself today. Like really really REAL. When it comes to risk taking you’ve GOT to know what you can handle. You might think your Evel Knievel, but it turns out you’re more like those people who wore masks while driving alone during the pandemic lol.

Motivation

Money

Ok, so you got some spare money and want to make it grow. There’s a few things you need to have figured out before you start investing:

1. Getting your savings account squared away

2. Knowing your risk tolerance

3. Knowing your time horizon

Today, we’ll be talking about knowing your risk tolerance. If you missed part 1 check it out here.

So what does ‘risk tolerance’ even mean? Essentially its a fancy way of saying how much will the value of your investment fluctuating up and down ‘F up’ your mental health and/or ability to sleep at night!? This is a SERIOUS consideration. Why? Because IF YOU SCREW THIS UP YOU WILL WRECK YOURSELF IN THE PROCESS!!! And I don’t want to see you get wrecked!

Ok, so its best to think of risk as a SPECTRUM. Meaning there’s a wide array of risk’s as well as tolerance for them. Lowest risk investment are commonly thoughts to be things like CDs or bond funds. Highest risk investments are things like tech smaller stocks and cyptoassets. Why take on higher risk? Well, because as a general rule the higher risk you take = the higher potential reward. However higher risk also = higher chance of losing ALL YOUR MONEY.

Alright, tough question time. How much risk are you comfortable taking with your investments? And unfortunately, this is a question that you won’t truly know the answer to without some experience. Unless you’ve experienced first hand how hellacious it is to have your investment’s value drop like a rock you can’t truly know; you can only guess. Until that happens you need to make your best guess on what your risk tolerance is. Here are some scenarios to consider:

• If my investment is down 5% will I lose sleep? Immediately want to sell? How about 10%? 20%? FIFTY FREAKIN’ PERCENT? I’ve experienced these types of losses with regular old blue chip stock investments, it absolutely CAN HAPPEN

• If your hanging out with friends or family and suddenly the conversation turns to TRASHING ON the thing you’ve invested, will you want to sell or swap to a different investment?

• A news story starts to circulate that makes you think your investment is going to PLUMMET any second. You going to keep your head and research it or go straight to figuring out a way to sell?

Think hard on what your going to buy and how you’ll react to the inevitable ups and downs of investing. If you can stomach the ups and down of more volatile investments your returns will likely be better, even life changing. Now hopefully your savings fund makes those ups and downs easier to stomach…. Because I promise you the ups and downs WILL come.

FINAL MEMES

That’s all folks!

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The information contained on this Newsletter and any resources available for download through this newsletter are not intended as, and shall not be understood or construed as, financial advice. I am not an attorney, CPA, or financial advisor, nor am I holding myself out to be, and the information contained on this newsletter is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. Make your own choices and don’t sue me please.

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