Focus on Impact, Not Risk When Investing
Investing comes with a certain amount of risk, and for some people it is generally off-putting. But your level of risk varies based on many different factors. When it comes to investing, it’s best to focus on exposure.
At the New York Times, financial planner Carl Richards reminds us that we cannot control risk, but we can control our exposure to risk. Because of this, you should not focus on risk, you should focus on impact.
Since we are dealing with a world that appears to be more risky, I suggest making exposure our priority. Whereas risk raises the question, “What could have happened?” The exhibit asks: “What impact will this have on me?” We may not always be able to answer the first question, which creates stress and confusion. But we always have a pretty good idea of how to answer the second.
The point is that there is a risk. But you can minimize its impact. When it comes to investing, this means focusing on asset allocation rather than a market that you have little control over.
Learning how to minimize your exposure to risk is far more profitable than simply not investing at all. To see what else Richards has to say about this, click the link below.
Exposure Brings Clarity to the Risky World of Investing | New York Times