In our last segment around playing life with a different zero, we introduced you to the idea of playing the game of making money regardless of how many zeros are at the end of your portfolio. Today, we look at the difference between those that play and those that don’t play at all and how the greatest risk of it all is not risking anything to begin with.
Let’s break this concept down to a simple stage that many can relate with. Most people have at least $5,000 in disposable cash. While most people can say that this $5,000 is not their only money, they can also say that they are not willing to invest or spend that cash. It is disposable, yet holds a certain level of comfort that disables people from being able to actually let it go. So let’s take a moment and analyze why people that play the stock market everyday are willing to risk the last $10 in their accounts versus those with over $50,000 in spare cash can’t even consider playing half of that money in the market out of the fear of losing it. It’s almost the same feeling as a gambler betting his very last dollars versus keeping a few hundred in his pockets.
Is gambling any different than investing?
Not really, both offer the same thrill, both are impacted by conditions you can’t control, and both give you, as the expert, that feeling that you figured out the pattern or system but yet both can make or lose you money. There is however one difference and that’s the fact that investing can actually make you significant wealth while gambling actually ends up costing you money in the long run.
Are investors gamblers? Are investors risk takers? And perhaps do they have a higher tolerance for risk and why?
What is considered risk for you is not risk for everybody else, and what is considered risk for others isn’t always considered a risk for you. Risk is fear’s cousin from an emotional standpoint. It is the foundation or outcomes of things we don’t know or don’t have an understanding for and therefore translate potential outcomes into fear which in result, paralyzes us from acting but allows us to blame it back on this idea which we call risk. The fear that is created when associated with risk is often as a result of ignorance or lack of experience with a subject or issue creating a fear of what we don’t know.
As individuals, it is only normal that we fear what we don’t know or understand. A simple example would be our fear of getting sick, we immediately assume the worst most times because we don’t know what we have and feel that if we are sick and it is more severe than usual, then it is more abnormal and requires immediate attention by a specialist. Once we find out, we often feel better immediately due to the ease that our minds go to even though we haven’t even started the treatment.
Investing is the same, it’s all about your comfort level with risk and a good understanding of what and why but more importantly it is about the education and experience level. Those that ultimately conquer their fears and enable their risk tolerance to venture them into unknown territory will conquer new experiences faster and enable their own growth to be accelerated. Remember what they always say…
”Invest when others are afraid but be afraid when others invest.”