Why is Investing Risky?

 

First off, I am going to make some extra-ordinary claims here that you may or may not believe. However, I think with a little logic, and an attempt to understand, you’ll find that my claims are true. Let’s start by asking a few simple questions and answering them. Is Investing risky? Yes, but not at all how you think. Then I will ask this question which contradicts the first question. Why is investing risky? It’s not. So…. What does this mean? Let’s dig into this and it will all make sense.

 

Is investing risky?

 

Literally everything in life has risk. When you sleep, you risk not waking up. When you stand, walk, or run, you risk falling down. If you have ever eaten anything, you’ve taken the risk of choking. If you have ever taken a bath, you’ve taken the risk of drowning. Literally everything in life has some risk to it. Investing is not different.

Investing does have risk. It would be a complete lie if I said that investing does not have risk. However, when money becomes the point of focus, everyone let’s risk become debilitating. Don’t do this. You need to invest, and accept the risk that comes with it.

Investing is very similar to driving a car. Being in a car is extremely risky. However, would you ever stop using vehicles for transportation? I can guarantee that you said no. Why did you say no to this question? Because you understand that vehicles make life so much easier. Going to your local grocery store which is a 5 minute drive would become an hour walk. We can all agree that driving has risk. You could get in a car accident. However, we all know that the value and benefit from being in a car outweighs the negatives.

It is the same way with investing. Sure there is a risk that you may lose money. However, most of the time you lose money will be very minimal. It’s like a tiny scrape on your car. You may lose a few dollars here and there. Let’s say that you have a big accident where you lose a couple hundred dollars. You cannot disregard all of the benefits you received from investing because you had an accident. Sure, you had an investing accident and lost $100, but you cannot forget that you made $400 that year through investing.

 

Why is investing risky?

 

Before you’re allowed to drive a vehicle, your local laws will require you to get a driver’s license. Why? Because they know that the driver is the single largest risk factor. We all know this to be true. If you’ve ever ridden in the car with a bad driver, you have an instinctive reaction of fear because you realize they are unsafe drivers. However, the better you are at driving the more risk is minimized. Sure, there is always a level of risk, but it does minimize with more training, experience, and a safe mentality.

Investing is exactly the same. The risk you face while investing is largely due to the person behind the trade. If the investor is untrained, inexperienced, and has a bad mentality, the risk is high. As the investor becomes better, the risk is minimized. So, effectively, investing is not dangerous; the investor is dangerous.

So, what can you learn from this? Invest in yourself. Read books, take courses, read articles such as this one, listen to podcasts, and find mentors that are willing to help you become better at investing. Self investment will dramatically lower your risk while investing in the financial markets.

 

Combining This information

 

So, back to the original two questions. Is investing dangerous? Yes because everything has risk. But we also know that the risk from investing is from the investor. Why is investing dangerous? It’s not. The investor is dangerous. So now you should have a strong understanding of the risk of investing. As long as you prioritizing investing in yourself first and continuously, you will become less risky and investing will become less risky. Then you’ll realize that the risk you do take investing is not as big as the rewards you’ll receive from investing.

How do you overcome the risk of investing? Invest in yourself. Never stop. Begin by investing in yourself. Then continue investing in yourself for the entire length of your investing life. This is the fool-proof way to contain, and eliminate risk.

 

Resources

 

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