House Risk
A lot of people spend a whole lot of time worrying about the small stuff: a little extra yield on their savings, a few dollars less in mortgage payments, slightly higher returns, slightly lower commissions. They pore over Internal Revenue Service publications and fat tax guides searching for ways to save a few hundred bucks on taxes. They read personal-finance magazines, buy books and scour the Web looking for tips.
Fine. It pays off. But does managing your money have to be this complicated? Actually, no. In fact, if you spend all your time focusing on fractions of a point, you may lose sight of the big picture. The blunt truth is that if you make the right choices on a handful of major decisions, you’ll probably never have to worry about financial security.
1. How you handle risk
Risk affects all aspects of your life. Would you rather work for a rock-solid company with a strong benefits package, join a smaller startup with great stock options or start your own business? The potential payoffs escalate as you take on more risk, and so do the possibilities for disaster. The same is true for investments.
Make sure your risks are age-appropriate. If you’re young, you can dust yourself off and start again. For people over 40, the ability to absorb losses diminishes rapidly as retirement nears.
Do your homework. Risk without research is just another form of gambling. Before jumping into any kind of investment, it’s vital to do the due diligence required to accurately evaluate risk, the potential for gains and the potential for losses. Don’t make yourself a target for unethical advisers or garden-variety con artists.
source: Richard Jenkins, www.moneycentral.msn.com
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