3 Good Reasons to Take More Risks

Many of us are conditioned to think that all risk is bad. We hear about putting our money where it can grow “risk free.” The reality, though, is that risk isn’t always a bad thing. Indeed, with risks often come greater rewards. If you really want to get ahead, you need to stop playing it safe all the time. Here are 3 good reasons to take more risks:

Why Taking Risks is Good

You Can See Higher Returns

One of the biggest reasons to add a little risk to your portfolio is that you have the potential to see higher returns. If you keep all of your money in a “risk free” savings account, you will likely never see the yield necessary to build adequate wealth over time.

This doesn’t mean that you go for the riskiest investments out there. Successful investing is more about taking calculated risks than it is about trying to force higher returns from dubious assets. Carefully consider your situation, and your goals. Look at some of the investments that come with acceptable levels of risk. Index funds, certain dividend stocks, and other assets can provide you with a solid return without breaking the bank. You have greater risk, and you also have greater potential for wealth over time.

Entrepreneurship Requires Some Risk

We wouldn’t have entrepreneurs without risk. In order to succeed as an entrepreneur, you need to put yourself out there in some way. Whether you start your own business on the side, or whether you leave the traditional job entirely behind, it makes sense to take on some risk.

One of the risks that comes with entrepreneurship is failure. It can be scary to think that you might fail in your business venture. However, that risk of failure can push you to improve your business, and imagine creative ways to solve problems and get the results you want. And you might even fail. But if you learn from that failure, and make improvements, it’s usually worth it.

All of the great entrepreneurs and business leaders allowed a measure of risk into their lives. If you want to succeed with your dreams, and with your business, you need to be willing to take a calculated risk or two.

You Can Grow Personally When You Take Risks

Whether you are putting yourself out there and meeting new people, or whether you are looking to learn a new skill, there is an element of risk involved. Taking risks, getting out of your comfort zone a little bit, can help you grow as a person. You’ll learn new skills, and you’ll practice making things happen as move beyond what you are used to.

In reality, complacency has its own risks. If you aren’t taking risks and growing personally, you will find that some doors remain closed to you. You might not be seen as ready for a promotion, or you might not have the skills and knowledge to take your business to the next level. To some degree, healthy risk-taking pushes us to do better things.

Don’t Take Too Many Risks

Of course, there must be moderation in all things. If you are constantly playing it safe, it makes sense to take a few more risks. However, you don’t want to take huge risks that could be potentially devastating. You don’t want to play with your family’s wellbeing, or risk complete meltdown. It’s important to carefully consider which risks you take, and how far you are willing to go.

If you aren’t comfortable speculating on commodities, don’t push yourself to start getting into the futures game. You can temper your risk a bit by investing in a commodity ETF as a small part of your investment portfolio, or you can look into other asset classes that offer decent returns without quite so much risk. Before you take a risk on your business idea, consider shoring up your finances so that your family won’t be in serious trouble should you fail.

There are ways to hedge against the risks you are taking, and it’s a good idea to consider these methods. Exposure to risk can be a good way to get ahead and see better returns. However, you don’t want to end up over-exposed.



Author

By , on Sep 16, 2012
Miranda Marquit Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own personal finance blog: Planting Money Seeds.

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