Seattle
Valued Senior Member
How do you access risk/reward in your life?
There is no one right or wrong way of course. It's just a subject that I find interesting.
You can be more or less risk averse than someone else. You could be willing to accept more risk because you have a lot of money anyway or you could feel that you have to accept more risk because you have so little money. Examples would be riskier stocks vs playing the lottery.
You could have some money invested and use the old 60/40 rule to plan for retirement which would be 60% in stocks and 40% in bonds. You could use the "rule" that the stock percentage should go down as your age goes up so you might have 70/30 if you are 30 and 30/70 if you are 70, for example.
You could decide that bonds aren't that great these days so you could chose to eliminate bonds at 40% and keep 20% cash (which is even safer) and increase the stock allocation to 80%.
This concept doesn't even have to apply to investments. I know a guy who scuba dives but doesn't like to go too deep because "I have young kids at home" but he rides a motorcycle to work every day. Again, it's his personal risk assessment.
Maybe you go drinking with your friends frequently, know it isn't great for your health but you eat right and exercise and take that all into account.
Of course you may make all these choices without really thinking about them in this way. Also, a lot of times you may make some of these decisions/choices for reasons that have nothing to do with risk/reward. For instance, I have done some higher risk recreational activities but I rarely drink. Is that to balance the risk from the hobbies? No, I just don't enjoy drinking very often.
Do you have any ways that you think about risk/reward as it applies to you or is it just something that operates in the background without you giving it a lot of thought?
If no one finds this an interesting topic, consider it as just another blog post (without footnotes) on here.
There is no one right or wrong way of course. It's just a subject that I find interesting.
You can be more or less risk averse than someone else. You could be willing to accept more risk because you have a lot of money anyway or you could feel that you have to accept more risk because you have so little money. Examples would be riskier stocks vs playing the lottery.
You could have some money invested and use the old 60/40 rule to plan for retirement which would be 60% in stocks and 40% in bonds. You could use the "rule" that the stock percentage should go down as your age goes up so you might have 70/30 if you are 30 and 30/70 if you are 70, for example.
You could decide that bonds aren't that great these days so you could chose to eliminate bonds at 40% and keep 20% cash (which is even safer) and increase the stock allocation to 80%.
This concept doesn't even have to apply to investments. I know a guy who scuba dives but doesn't like to go too deep because "I have young kids at home" but he rides a motorcycle to work every day. Again, it's his personal risk assessment.
Maybe you go drinking with your friends frequently, know it isn't great for your health but you eat right and exercise and take that all into account.
Of course you may make all these choices without really thinking about them in this way. Also, a lot of times you may make some of these decisions/choices for reasons that have nothing to do with risk/reward. For instance, I have done some higher risk recreational activities but I rarely drink. Is that to balance the risk from the hobbies? No, I just don't enjoy drinking very often.
Do you have any ways that you think about risk/reward as it applies to you or is it just something that operates in the background without you giving it a lot of thought?
If no one finds this an interesting topic, consider it as just another blog post (without footnotes) on here.