Newsletter: Risk Mastery: The Key to Sustaining Wealth

What comes to your mind when you think of the word, “risk?”

Maybe when you hear the word “risk”, you think of the word danger, or the potential for of an undesirable outcome to your health, wealth or time.

Or maybe when you hear the word, “risk”, you think of all the possibilities associated with potential outsized financial gains as you put some of your money on the line for a solid investment.

Either way, whether you see it as a danger keep away from at all costs or an opportunity to make money, moving through risk carefully can open up a world of opportunities for you when approached thoughtfully.

Indeed, risk is like a powerful and unpredictable ocean wave faced head on by a skilled surfer. And, just like that surfer, when you skillfully navigate it, harness its energy and ride it skillfully, you can experience an exhilarating surge that propels your life forward, allowing you to reach new heights that you otherwise wouldn’t have been able to experience.

However, if you underestimate its strength or fail to maintain your balance on life’s surfboard, then that same wave can quickly overpower you, pull you underwater and humble you in an instant.

Indeed, just like riding the waves of your own life, sometimes you need to know which risks to take and which to avoid, how to prevent unnecessary losses when you do take risks as well as being prepared for when life throws you an unexpected curveball.

That’s why when it comes to achieving and maintaining financial independence, being able to master the way you prepare for risks is key to sustaining the wealth you build along the journey.

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August Financial Independence Topics

This month, we’re diving deep into three main topics:

  • Evaluate whether a trust makes sense for you
  • Tax shelters, tax-free financial products and asset transfers
  • Ways to calculate your life insurance need

Log in to the FI|Mastery Journey and get started on essential tasks to get your financial house in order!

The Big Questions

If you do nothing else this week, consider the following Big Questions to help keep your financial house in order:

Avoiding High Risk Investments

What steps can you take this week to assess the risk level in your current investment portfolio? Do you hold any assets that could be considered high-risk and how do these align with your financial goals?

Take a moment to re-evaluate your investment portfolio. Have you been lured by the potentially high returns of speculative stocks or cryptocurrencies? Remember, the thrill of potential gains can quickly turn to despair with the inherent volatility of these assets. While they might promise substantial returns, the risk associated with them can outweigh the potential benefits.

Prudent Borrowing and Risk Avoidance

How are you currently using debt to achieve your financial goals? Can you identify any areas where you may be excessively leveraging and therefore exposing yourself to risk?

Are you leveraging debt to boost your wealth? While it’s true that smart use of debt can accelerate your financial goals, excessive leverage can become a ticking time bomb. Remember, using margin to increase investment holdings can amplify gains, but it can equally magnify losses.

Investment Diversification and Hedging

How diversified is your current investment portfolio? What steps can you take to ensure your investments are well-distributed across different asset classes to mitigate risk?

Consider diversifying your portfolio. Spreading your investments across different asset classes, such as stocks, bonds, and real estate, can help reduce your vulnerability to single concentrated stocks. This way, even if one stock underperforms, others might perform well, cushioning you against potential losses.

Financial Planning Articles

  • Ranked: Things vs. Experiences vs. Things that Keep Creating Good Experiences
  • Investing for Money vs. Investing for Happiness
  • Finding Your Purpose in Retirement
  • How to Stay Rich – the Gettys
  • Woulda, coulda, shoulda: the haunting regret of failing our ideal selves

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Analyst Corner

  • CFRA research reports for GOOG, IBM, DUOL, AUR
  • Markets look past Fitch ratings downgrade
  • Job creation cools, unemployment falls
  • Opportunities in globalization rewiring
  • What happened to late boomers’ retirement wealth?

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