Everything in life is risky, it’s a game of probability.
Although we have rules in our modern societies, at the end of the day we remain biologically programmed for self-preservation and protection of our offspring. I try to keep that in mind during my daily life, so as not to expect anyone to look out for my interests and do the job I’m supposed to be doing.
If anyone does happen to act in that way, then it will make my day. But it’s never my default expectation. I learned to think in this way from Stoic philosophy and it has served me very well in the past years when I’ve had to deal with adverse and uncertain situations.
Ultimately, I’ve made peace with risk and even grown to love it. I wake up every day excited to know what opportunities (and risks) I will come across during the day, knowing fully well that I will win some and also lose some.
My aim in business and investing is to be able to look back every five years and ask myself:
Am I significantly wealthier than I was five years ago?
If the answer is yes, then I’m happy with what I’ve been doing during those years. If not, then it’s time to see what I’m doing wrong. Over the long run, it is our actions that determine our destiny, but that is not necessarily the case in the short run. And that is why you need to adopt a long-term approach to not only investing but life in general.
Almost anything can be a good investment, for the right people at the right time. Say you got suckered into a pyramid scheme like Neways, which was popular in Malta when I was in my early twenties. The majority of the people lost their money, but those who got in early made some tidy profits. It all depends on the circumstances of your investment.
It is inevitable that you will make some bad investment decisions along the way. Just like in sport you will have bad performances that will cost you matches and championships. Of course, you should have known better, but that’s how you acted in those circumstances due to all the various factors involved. The only thing you can do is to try to learn a lesson and move on.
Life is such a continuous game of mistakes and lessons learned. A good base of education will ensure that we avoid getting wrecked, but there is no way to avoid making mistakes except not playing at all.
In investment, my approach is to learn as much as I can within a reasonable timeframe, then dive in. If it’s a new asset class that I’m interested in, I will spend 6 months reading everything I can find about the class, then go straight in with small amounts, leave another 6 months and hopefully learn some lessons along the way. After 1 or 2 years I’m ready to take bigger steps.
Make sure you do your own homework before you invest and don’t rely on other people’s advice. Be prepared to lose money and subsequently spend your time analyzing what went wrong and what you can learn rather than complaining or feeling bad and blaming yourself or other people for it.