Accounting Solver

TAKING CHANCES 2

by ren on May 13th, 2008

There is a law of investments that is as immutable and unforgiving as the law of gravity: Investments with High Yields have High Risks. Focusing on the potential earnings and losing sight of the safety of the principal is what happened to many who were hit by the subprime tsunami.

The trick in taking chances in investments is to have a solid base of safe / low risk investments, so that you are not incapacitated if the worst happens. For better earnings and growth in your investment portfolio, maintain some in high yielding high risk investments. The thumb rule is: make sure that, if the reverse occurs in your earnings prospects on these high risk investments , you don’t lose your shirt. In other words, you can afford to lose the whole amount you placed in these high risk investments –something like betting on a 17 in blackack.

And, remember Murphy’s Law: If anything can go wrong, it will.

graphics by Ren Garcia

Share This

Related Stories

• TAKING CHANCES 1
• A COMMODITIES TRADING STRATEGY FOR YOUR FUEL CONSUMPTION
• TAKING CHANCES 3: Betting on a sure thing
• THE BEST USE OF CREDIT CARDS: Cash Flow Management
• PERSONAL FINANCE 11: THE WORKINGS & USES OF A PERSONAL CASH FLOW STATEMENT WITH NO EARNING ASSETS 2

POSTED IN: Accounting Concepts, Accounting for NonAccountants, Best Business Practices, Personal / Household Finance