I’m writing on this topic because I’ve been a victim of not taking a calculated risk.

All of mans’ endeavors carry some risk but some are riskier than others. Why? The actions of today have consequences: It is the reason why doctors tell us to stay away from drugs (hard drugs).

A risk is a consequence of an action(s) taken in spite of unpredictable, uncontrollable future or outcome. Saving is an action, Spending is an action and Investing is an action, hence, they come with their consequences. Risk can have a positive or negative effect on a set of goals, take, for instance, you are saving now to be able to pay your children school fees in the coming years, you are not sure of what will happen in the coming years (the uncertainty), yet you are saving the money. You do not know if your children will even want to further their education, yet you are saving. In this case, you are not losing as you would still have your money, but in other cases, you might lose part or all your money. That is what risk is about, gain or lose.

Risk has potentials. The potential for risk to have a negative or positive effect on goals is an important concept. It is natural for people to fall into the trap of thinking that risk have inherently negative effects. Such thought is deceitful because if you embrace those risk that creates positive opportunities, you can fulfill lifetime goals and dreams. Uncertainty is at the heart of risk. A risk is only taken when you are uncertain of the outcome, otherwise, you have not taken any risk.

However, there are different types of risk, but we are concerned with financial risk. Financial Risk is the chance or possibility of having a lesser return on investments. That is, an investment’s actual return might differ from the expected return. The greater the potential return one might seek from an acquisition, the greater the risk one generally assumes.

Risk plays an important role in Personal Finance. For example, you need a new android phone, you can either buy a brand new one or a fairly used. Getting a new one gives warranty and assured quality (generally safer), hence, reduces risk and price is higher. More-so, getting the other type is riskier and the price is lower. Prior to the acquisition of an item or a product, a certain value is expected in return, so, there is a chance of gaining little or no value on the item or product acquired.

Different people can take the risk to a certain degree, the more risk one takes, the higher the chances of making more money and vice versa. We have to take the risk, it is how greatness is borne. Yes, take the risk: to start a new thing, to start a new business or do an old business in a new way but be sure it is a calculated one.

Accordingly, the term risk attitude, appetite, and tolerance are often used to describe an individual’s attitude towards taking a risk. How much risk you can accept is known as risk appetite. Your attitude can be risk-averse (hostile to taking a risk), risk – neutral (middle of the road when it comes to taking a risk), or risk – seeking (always looking for risky businesses), while risk tolerance looks at acceptable or unacceptable deviations from what is expected. Due to the potentials of risk (negative or positive), it is therefore important that one learns the art of risk management.


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