Remon Talks

When doing business we all face the risk versus reward situation someday. The same is true in finance and even in day-to-day life. When should you take the risk and when shouldn’t you?

When NOT to take risk

You should never, let me repeat that, NEVER take a risk when the potential reward is slim to none and the risk is high.  For example, you have saved $50,000 and decide to buy stocks even though you know nothing about stocks and the stock market. That’s a high risk - low reward scenario.

Another example, starting a business in a field you haven’t tested/explored yet. While it can turn out good, the risk is high and the potential reward is unknown. Explore the market first and make your decision based on your findings.

When to take risk

You should take risk when the risk is small, and the potential reward is big. Sounds easy but still many people fail to understand it.

For example, starting a website and making money with it. Start-up cost is maybe $10 to $20 and the potential reward is virtually unlimited, depending on the time and work you put into it.

Another example, starting a business in field that has been researched and has a need for your product. Again low risk, high potential rewards.

If you have a dayjob you can apply this as well. Say you earn $2,000 a month but you think about leaving because you’re paying too much for travelling to and from work. Instead of leaving, talk to your boss about it. The risk is very low, he can say no, the potential reward is high, he can say yes. The boss would be happy to keep you and you would be happy with the raise.

Even in day-to-day life you apply this principe. Maybe you have a crush on someone? Ask her (him) out! The only risk is that she can say no, the potential reward is a lifelong relationship with her.

The next time you have to make a big decision think about the potential rewards and the risk you have to take, and see if the reward is worth the risk.

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