Asymmetrical risk & reward
The richest of the rich know a thing or two about turning money into more money. When you’re investing, one of the most important things to know about is asymmetrical risk & reward. What does this mean exactly? Well, when you invest into something you, you don’t want to lose. The famous investor Warren Buffet’s two rules of investing are 1)don’t lose money
2)see rule number 1.
When you’re investing and you lose money, it’s going to take you twice as long to gain that money back so it’s extremely important that we approach investing with a mentality of not losing. Sure, you’re going to have to deal with a little bit of risk unless you want to get a small return on you investments, but there’s a way to do this without having to risk too much.
Have you ever heard of life insurance? I’m pretty sure anyone reading this has probably heard of it. But have you heard of investing in life insurance? I’m not talking about buying a policy, I’m talking about literally investing into the companies that sell life insurance. They’ve got their numbers and logistics figure out so well that you can actually invest into these companies which is called private life insurance investing. Want to know what your investment will look like? Basically, if you had $1,000 to invest into one of these companies, they would take your money than guarantee you won’t lose any of it. Then, they will tell you that if your investment goes up, you get to keep up to 8% of the profits. Let me say that again, you won’t lose any money but you still get to keep a big portion of the upside. Let me repeat that again, no just kidding but surely you understand the value of this. The cool thing is that even if your “stock” only goes up 5%, you get to keep all 5%! If your stock goes down 10%, you don’t lose a dime! But how is this possible you ask? Well, the stock market usually goes up about 11% every year. With that being said, if your stock goes up 11%, you only get to keep 8% of the upside and the insurance company takes the rest. They know that over the course of history their chances of coming out ahead are really good. They also know that with so many investment options out there, they had to make you an offer you couldn’t refuse. After their corporate monkeys banged on enough calculators and wrote out tons of different ideas, this is what they came up with.
Did you know there were investments available to you where you are guaranteed to not lose any money but also get to participate in the upside if it makes money? Not a lot of people do. Most people only know about mutual funds because companies that sell them spend billions of dollars on advertising them every year. The other problem is that to invest in one of these types of funds you had to have $100,000 minimum to get involved. Now-a-days, there are no minimums. That’s another reason your probably not familiar with investments like this because they just recently became available to everyday people. I hope this articles been extremely informative on asymmetrical risk and reward and opened up your eyes to a whole new world of investing. Imagine if you had you money in these types of investments when the market crashed in 2008, how would that have affected your life? This articles been brought to you by Orangecountypatiopros.com.