Last Updated on Dec 13, 2021 by James W

Creating new financial opportunities depends heavily on your investment strategy. But there is no gain without pain, so mistakes are expected. To fully utilize your portfolio, taking investment risks is part of the game. 

What Is Considered an Acceptable Risk?

Any investor that is honest about their position will agree that risk is always involved with success. Even the biggest success stories on mywealthandinvestment involve an innovator thinking outside the box. Those big stories about financial supremacy started with an individual creating a sound financial strategy. Along the way, some acceptable risks were taken to meet personal goals. 

Acceptable risks with investments can be small things like overpaying to keep your position in the stock market. Larger but acceptable risks can be flipping property in an unstable housing market. No matter the size of the risk, the point is to keep within your original strategy. An acceptable risk will always move you closer to your financial and investment goals.

Understanding A Bad Risk

Avoid bad risks at all costs if you want to see any actual reward for your effort. A bad risk comes in many forms, with the most notable being an all-or-nothing approach to investment. Betting everything you have on one investment is never a good idea, even if it is considered a sure thing. This is why the original strategy matters when deciding how to pursue it in an optimal manner. 

A bad risk endangers a good strategy, but you’ll never see it if the original plan isn’t well thought out. If your investment strategy is to make as much money as possible, then the actual foundation (and future planning) will suffer from the emptiness. An example of a sound investment strategy is spreading your assets around historically reliable stocks, then taking a percentage of the gains to invest in select volatile stock. 

With this strategy, the chance of a big risk torpedoing your investment is nonexistent. This execution is possible thanks to a sound strategy that leans more towards a reward system with acceptable risk rather than instant gratification with a big risk. 

Balance

You’re going to have weeks when you are in the zone and everything is going right. When that isn’t happening, mistakes will be made, but fully recoverable if you’re a smart investor. But there is a gray area between these two extremes that should always be respected. This is where balance comes into play, and where patience and smart investing payoff.

The balanced part of investments is when nothing is happening. You’re not gaining, and you’re not losing. For some individuals, this is a bad thing that forces them to make something happen. The result is often chaotic, and an expected result is when they go away from a smart investment strategy. Learn to appreciate the ‘balance’ part of investments, and your actual rewards will be that much sweeter. 

It’s Not a Gamble

Balancing the risk and reward system for investing is not gambling. It is a smart way to incorporate useful data in the most effective way possible. By optimizing your position, you’ll always be a step ahead of other investors.