stage 03 part 4 Balancing risk and reward

d. Balancing risk and reward

We mentioned in section one that there are advantages and disadvantages of avoiding fear. One of the ways that we can deal with this in terms of developing a new project is to do the appropriate research beforehand. We need to weigh up the rewards that we would get from going forwards and compare them to the risks of both doing so and not doing so. If there are any risks appropriate action need to be taken to minimise them and as far as possible. Only when you have done the research can you determine whether the reward of going forwards outweighs any risk involved.

The books about how to become wealthy talk about the idea that wealth only comes our direction if we take calculated risks. They encourage people to do their research so they to discover the information that they need to make a decision. They know that it is only when they take such a risk that they will gain the reward that they are looking for. However, they also know that despite taking care that they will not always come out on top. They may lose from a deal not matter how careful they are. The issue then becomes the number of deals that they have made that work well compared to the number that work out badly. Not only that but they will often look for a series of deals that will be successful and then even if they are only moderately successful they will be ahead. They recognise that if they keep on looking for the one big deal that they may find themselves waiting a long time. They would rather take a series of small steps to reach their goal rather than one large one and over reach themselves.

How do you calculate risk?  One way is to find the answer the following questions;

•  What is the best thing that could happen?

•  What is the worst thing that could happen?

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