Coffee with Mike – My Risk Tolerance

When I think about investing and what kind of risks I’m willing to take, I think about opportunity and I think about the worst thing that could happen. If I can accept the worst thing that could happen, then I’m good to go. I’m ready to invest. And if I can’t, then I’m going to walk away from the opportunity, regardless of how good that opportunity looks. So, I want to make sure that I understand it. If I understand it completely enough where I know what the danger is, I know what the risks are, then I’m going to invest in it. 

For instance, I’ve always been willing to invest in my business--I like to be in control of that. I like my wife being in control of that. I like my family being involved in that. But you know what I haven’t done? I haven’t bought a rental home. I’m not confident that I know how to value a home; I don’t know why it’s worth $4,000 less or $5,000 more. I don’t really understand that, and I haven’t tried to figure that out. I don’t want to be a landlord. What if I have to kick somebody out? I don’t think I want to be in that position. Although I think they’re probably a good money-making opportunity--I know lots of people who make good money on it--I just don’t want to do it. I don’t like the feeling of having to be a landlord, having to be a hard-line guy. I’m not going to do it. So, I walk away from that. Where I feel like it honors my values, it honors my personality, and it’s what I want to do, then I embrace it. 

You should think through your investment decisions the same way. What is the worst case scenario with the investment? If you are okay with that scenario, move forward and feel confident about that choice.