Investing is About Two Questions
Most people think of investing in terms of Reward. But Because of a guy named Howard Marks, I think of investing in terms of Risk. Meaning I don't think:
How much can I make with this investment in xyz?
I think:
How much can I lose investing in xyz?
Now I am not perfect at this because like anyone else, I get overly excited about a potential investment opportunity. However, thinking in this way has forced me to count the cost of investing more times than not.
Part of thinking about the Risk forces me to ask more questions but particularly two main questions
Question 1: When Do I Need this Money?
Question 2: How Much Can I Afford to Lose?
By asking these questions, I decide what type of money I can invest. This frees me to make a decision that I can live with regardless of what happens in the market. I can watch my money go down for years and not freak out because I know the money I am investing is not money I need anytime soon.
If you ask yourselves these questions before investing in anything, you'll be much better off.
Just a quick write up this time but I will be back on Monday
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