Wednesday, January 04, 2006

Life is risk, don't avoid it, manage it.

We can accept that any and every action has an attendant risk, or we can run and hide.

What is important is understanding the degree of risk and the appropriate actions required.

Risk is part and parcel of life. If you are not worried, you are not risking enough. - Or you are dead.

The key is not to avoid risk but to manage risk. - "Ya gotta pay attention."

Limit the dangers of risk by creating and following speculation rules.

Embrace risk, the worry that comes with risk, and the rewards for properly managing risk.

Speculate within your knowledge, skill, and talents.

If you are just starting, very small bets are meaningful. - You can expect to lose.

You are buying experience, get it on sale.

If you are lucky and start as a winner, be extra careful, it is easy to overextend and then get trapped.

Buy and read good books; knowledge multiplies experience, greatly increasing the value of your small bets.

It takes years to become proficient at any skill. If those years are all in the same type of markets, it may take even more time.

Remember, you don't have to play.

Professionals play constantly, that's their job. You can choose to play only when the odds are heavily in your favor, and pass when they aren't.

When your rules and observations show it to be a propitious time, commit enough to make a difference. Leave the game when your rules and observations indicate increasing risk without attendant rewards.

Being in cash
is also an investment decision. It is always easier to make intelligent decisions about a market when you are not currently invested.

Life is risk, don't avoid it, manage it.



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