Building Your Money Machine 075 How to Avoid Risk in Investing
Too often we focus primarily on the return we can make when looking at investments. I know I did that many times but investments and any transaction for that matter can’t be made solely on the possible returns you may get.
Here’s why…
The return of an investment or your portfolio ALWAYS needs to be made in the context of the risk you are willing to accept to make the investment. When we ignore the related risks we stand to get hurt financially by making decisions that are far riskier than we might have planned or imagined.
Every choice that we make comes with a risk, and our capacity for risk is not constant -- it changes over time and it’s affected by our unique circumstances. That’s why we need to understand how to avoid taking unnecessary risks.
In this episode, I break down the components of risk and what you need to specifically consider for your investments and your portfolio. You’ll learn about three pillars that are important when evaluating your risk capacity, and how you can make decisions when looking for safe and smart investments.
The goal is to achieve financial freedom without jeopardizing your future and your family in the process. That’s why learning to evaluate risk is so important, and that’s what I want you to take out of this episode.
Today our conversation includes:
- What is The Risk Profiling Triad™?
- How to define your target so you know specifically what your goal is as well as when do you want to get there?
- The difference between asset allocation and asset diversification and why it matters.
Resources mentioned:
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“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” - melabraham.com/book/