How To Gamble Sensibly

Not all in one basket, please!

I think we have all been in situations where  some favorable turn of events suggested to us that lady luck was in our corner. Then we were liable to “bet the farm” against all rational measures. But how can we be open minded and think creatively about why and what we are doing?

What is happening and how do we see a larger picture?

Most of us like to think of ourselves as being rationale when it comes to a reasonable bet on the future.

Years ago our advertising agency had an insurance company for a client and I was reviewing a report that said that 80% of all lump sum payments received by a person regardless of age or occupation would be gone in five years, that’s right five years!  Why was this? Well, in the beginning ,one might feel that they could take this lump sum and grow it like it was on steroids so that they could really have something. This would mean that they were open to riskier investments with at least a portion of the money. As the riskier investment went south, there was the desire to make up for the loss by shoving a part of the remaining money into yet an even riskier situation.  You can see the pattern.

It is said in the venture capital world, those people who back start up companies that for every ten companies they invest in only one makes it and of course pays for the other ten failures. Why is this? It is because the unknowns are so great. Simple as that. But this piece of information is missed by the average person. Recently a large number of friends were offered a chance to invest in a star-tup in which they felt like insiders. The software product, opportunity, and people involved all made the opportunity feel exceptionally fortuitous. What happened was that a large number of people invested their entire retirement plans in this start-up. The company failed and they lost it all. Now if you had asked each of those people would they have invested in this start-up realizing that it only had one chance in ten most of them would have put up only a fraction of what they did.

My own personal belief is that when we gamble like this we are short circuiting our creative power. That is we are saying we need to get a whole bunch of something now because we are not confident we can create it as we need it. It does not seem like the universe supports that idea.

So approach your investments with the idea that you enjoy the process and that growth has a natural rhythm to it. Yes you can get extraordinary results  if you use perhaps a steroid kind of concept, but you also may kill that part. So divide your assets into different piles with different levels of acceptable risk and make sure that the pile you want to send to the races with a one chance in ten of succeeding isn’t everything you own. I feel this kind of creative thinking will bring a sense of balance to your life.

I would love to hear anyone’s thoughts on these ideas.

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