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Episode Chapters:
- 01:07: Money You Can Afford To Lose
- 03:37: Propensities For Risk
- 06:21: Know What You’re Investing On
- 07:22: Episode Break
- 09:43: A Thought Experiment
- 12:11: Financial Stability
- 13:18: The Matching Principle
- 16:26: Overcoming Your Fears
Excerpts and Highlights:
I don’t really subscribe to the belief that you should only invest money that you can afford to lose. Instead, what I believe is that you should put your money only on investments whose risk you can accept.
Whether money is involved or not, we actually make decisions every day based on the level of risk that is acceptable to us.
If you want to overcome your fear of losing money when investing, then the first thing you need to do is to learn about and understand the investment.
Have a healthy cash flow, build your emergency fund, ensure that you have proper financial protection such as health insurance, work on having multiple streams of income – the more financially stable you are, then the higher your risk tolerance will be.
One of the first things taught in an MBA finance course is the matching principle, which states that the best way to minimize financial risk is to match the time period of an asset, for example, your portfolio, to the time period of a liability, such as your financial goal.
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