No wealth without risk-The Times of India 3 Dec 2001, N Vidyasagar
Tendulkar always displays a degree of adventurism in every innings he plays. that’s the risk he undertakes.
no risk no gain is an age old axiom. indeed, risk is inherent to all investments. the trick lies in taking calculated risk, and ensuring that the payoff from investments is commensurate to the level of risk undertaken imagine Sachin Tendulkar playing defensive shots all the time. then, we would neither watch television nor get satisfaction out of the master blaster’s game. but that doesn’t happen. tendulkar always displays a degree of adventurism in every innings he plays. that’s the risk he undertakes. more often than not, it is carefully calculated risk. that’s why his game gives so much thrill to viewers. the same holds for taking risk to double money.
‘‘worry is not a sickness, but a sign of health. if you are not worried enough, you are not risking enough,’’ is the rule in the famous zurich axioms. the secret behind the success of swiss bankers is that they take risks. the road to wealth is paved with risk and one has to take the some amount of risk in building wealth. here we discuss the risks one has to undergo to be a winner in the money game. first, take risk: you will never fall in love if you are afraid to commit yourself to personal risks. one needs the same amount of guts to win in the money game. create savings and investment goals early in life. set your own goals and write everything down on paper. contact a financial expert and undergo a risk assessment test.
the biggest risk one undertakes is in the choice of an investment institution. half the battle is won if you pick up the right one. bet what you can afford to lose: decide on the amount you can lose. that is the amount which would not affect your normal life even if you were to lose it. everyone has to feed the family, send children to school, pay home loans and what not. the money you can afford to lose can range from rs 100 to rs 10,000 and upwards. experts advise that you should start modestly. they suggest increasing the dosage of risk as you gain confidence and experience. always remember, every successful entrepreneur begins small and grows big.
reduce risk through diversification: diversification means spreading of risk by putting money in several categories of investments. the idea is basically to play safe. if three of your investments get nowhere, may be the other three will get you something. normally the investment advice one gets today is that people who are above fifty should not invest more than 10 or 15 per cent in equities. but for investors in the thirties, investment advisors say they can invest 45 per cent or even 50 per cent in equities. but if one goes by the number one rule of zurich axioms, a fifty year old guy can plunge into the equity market if he can decide on the amount he can afford to lose. another thumb rule is not to diversify just for the sake of diversification.
put your money in instruments where returns are commensurate to risk. speculate a bit: always put your money at some risk. that means having a speculative strategy. experts say you will stay poor if you try to escape worry. no doubt, you will get hurt in the beginning. but by increasing the degree of risk in stages, you will learn to cope with it. history says that a larger number of investors have made money by taking risk than by avoiding it. so get used to it and enjoy it.
finally, make money work hard for you: the secret of success lies in making your money do the work so that you can relax. you can reach this level only if you have spent some time in following the earlier strategies. by taking some amount of risk you would have accumulated some amount of money. make it grow. like the same way many wealthy people continue to work because they enjoy what they’re doing. to enjoy later, worry a bit now.