Risk is the ability to lose money. This can be in the form of stock values going down, equity values dropping in real estate, going out of business and various other reasons something loses value. Risk kills sustainable wealth.

Why is RISK so bad? Why does “losing” hurt your future so much? Few people realize the effects of risk on your money. For example, if you have $10,000 and you lost 50% of it in a market downturn such as 2008, you would have $5000 leftover after the loss. If you gained 50% back the next year, how much money would you have? The majority of people say $10,000, you lost 50%, then you gained 50%, so you should break even because you have a 0% average! Unfortunately, this is not true. When you lose 50%, and you have $5000, when you gained 50% back, you only have $7500.

The traditional financial sector talks about what they “average” regularly. This is misleading because what matters is your actual return, NOT average. Few advisors disclose actual returns because of the loss of the effects has on their performance. You wouldn’t be happy if you knew what the actual return has been over the last 20 years.

When you add risk or loss potential to your future, the results typically become subpar. In investments, you can have moments you win a lot and feel great about your investment and other moments you lose a lot and feel frustrations and despair. I call this the home run/ strikeout method.

I'm Curtis Ray, Always Be Compounding™!

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