MARILYN LUIS DIAS
Nothing ventured, nothing gained “ that was the motto I uttered in my turn, for the school assembly and I have remembered it ever since.
But has it influenced me to take on more risk than usual in my life? Not at all. We all have different natures and by nature I wasn’t afraid to venture into the unknown for significantly large gains. However, does that mean I’m a gambler? Not really. By nature, I am also an organizational nerd who would exercise due diligence and research before investing into anything. As a result, my risks were always calculated and based on the law of averages, which is to say that if on an average an investment showed poor or below par performance, I wasn’t going to invest my money in it. If, on the other hand, the investment had, on an average, a good performance among other parameters, it would be a better bet for me.
So what kind of risk taker are you? Are you a person who avoids risks altogether? Or are you the kind that isn’t allergic to risk but doesn’t take undue risk? Or are you a well-seasoned risk taker that confidently manages a more speculative portfolio? Or are you a person that throws caution to the wind and gambles everything away without exercising due care?
To answer this question, we must go to the origin of the word and define what risk really is to us. Each of us has different definitions for the same word based on our personalities and outlook. However, the precise definition of the word is (exposure to) the possibility of loss, injury or any other adverse or unwelcome circumstance. Now, no one likes losses of any kind. However, when you throw an equal possibility of gains into this mix, reactions change. The very likelihood of earning big returns is indeed very enticing.
So, even though you may, by nature, be risk averse you might find yourself investing in chit funds or lottery tickets on the off chance that you hit the jackpot. However, if you do not win and there is every chance that you might not, you would lose all that you invested with nothing to show for it. But you do it anyway. Why? Because, according to neuro-finance expert, Dr Elise Payzan-LeNestour, gambling is hardwired in us. Both greed and lack of self-control are to blame for taking bets that have a 50-50 chance of winning. It’s anyone’s game. In these gambles, you will definitely incur a loss. You just won’t know when and it may take a long time but at some point, playing at these odds, you will definitely lose. Rationally we shouldn’t take such gambles, but we do so even though there is the real possibility of a loss. It isn’t that we aren’t aware of the possibility that we can lose but we overlook it overwhelmed by the desire to make a quick gain.
However, there is still hope for us, as we would definitely take measures, where available, to protect ourselves against such impulses that give us nothing more than a good dopamine kick. For example, many investors opt for mutual funds with lock-in periods of three years, as a deterrent to pulling out their money too soon.
When we invest in the stock market, it is a gamble when we try to time our entry into and exit from it, in the hope of clocking some tangible gains. Yet, if upon a thorough investigation of the market we were in it for the long haul (at least five to seven years) with regular monitoring of the essentials, we would have given the investment a chance to iron out its volatile returns and deliver a comparatively modest yet robust return, than if it were treated as a gamble.
