Fight! Risk versus Reward
Risk involves the chance an investment's actual return will differ from the expected return.
As they stood toe to toe, the outcome was uncertain.
It was not the typical good versus evil. It was good versus good. It was winner versus winner. It was so even, you did not need Steven.
This much was certain. Teens can be brutal. The risk was high for the loser's ego.
What was also certain, is there are times risk is required. It is necessary to achieve the outcome you desire. Nothing ventured nothing gained. How you prepare for it. How you calculate it. How you manage it, makes the difference. At least, that is what Coach always said.
Each understood you have to want it to win.
Juan and Jose were close friends.
It started three years earlier, the summer before freshman year. Their relationship forged at football practice. Both were excellent high school athletes. Can't miss superstars. They didn't miss.
Juan ran for freshman class president. He won. Sophmore year too. Junior year we did not have an election. Juan was just appointed.
Senior year, Juan ran for study body school president. Jose ran too. President of the entire study body. Freshman. Sophmore. Juniors. Seniors. The whole enchilada!
Jose won. Uh oh!
Juan was sad. He was steaming all day Monday! Juan was not accustomed to losing. The last time he lost anything, it was his pencil in kindergarten.
Trouble was brewing. Everyone knew it. Even Paul. Paul is a story for another day, possibly several days. You get the point.
Everyone claimed they were going to come to school early Tuesday. There is going to be a fight before the bell.
Tuesday morning came. Everyone was early.
Juan walked up to Jose. They stood toe to toe. No one's backing down said Paul. What did you expect said Dan.
Juan shook Jose's hand. He said Jose, "How can I help you?"
There were screams everywhere. "What?" "Hit him?"
Someone asked Juan, what happened?
Juan said, I talked to my parents. I am running for senior class president. BAM! Over. Done. Finished. Problem solved.
Risk of time wasted mitigated. Risk of lost opportunities due to wasted time and energy eliminated.
Parents know best. Sometimes. Kids listen to parents. Sometimes. This time was the right time... for each.
Before Tuesday ended, Juan was senior class president.
Wednesday, everyone was happy. Everyone talked about the big football game Friday night. Paul said, "There is a football game Friday night?"
An opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Investopedia
THREE GREAT MONEY HABIT TAKE AWAYS!
- It pays to have great advisors you can trust. Sometimes they are your parents. Sometimes not.
- Prepare for, calculate, and manage risk when necessary or required.
- One component of managing risk is to not allow a first to loss create a second, third or fourth loss. It is easy to add risk by misplacing our attention and energy. It is easy to miss opportunity in the process. Opportunity cost is a real cost. Squandering time is a real risk.
BONUS: HOW SAVING MAKES US STRONG!
The habit of saving makes us strong in a variety of ways. Here are six.
- Prepares us for emergencies
- Prepares us for opportunities and to make dreams and goals come true
- Positions us to invest smart. It helps reduce risk
- Builds discipline
- Teaches delayed gratification
- Builds confidence and esteem
Make it a Sammyriffic day!
'FREE' RESOURCES
Teach kids early great money habits.
Visit the Sammy's Dream Big Financial Literacy Showroom.
RELATED READING
Skittles Investment Risk Games | Hub Pages | Carolyn Augustine
Coaching outside the box: Risk vs. Rewards | Union Bulletin
Helping your child manage risk (risk in general) | Simple Kids
Weighing risk versus return | Bankrate
Risk vs. Reward: Overcoming the fear factor | Forbes | Kevin Harrington
KEY FINANCIAL WORDS
Adviser - Financial Adviser | Source: Investopedia
Risk | The Free Dictionary
Risk | Source: Sammy Rabbit
- A chance a person takes where the outcome is not known or guaranteed
- An action a person takes and are not sure whether something good or bad will happen
QUESTION
What is your best advice on managing risk?
