Reduce Investment Risks on Your Journey to Financial Freedom


Think you are a conservative investor? Think again.

When I talk to friends about financial freedom, they often tell me that I take too many risks and that they are more conservative when it comes to investing. But a conservative investor is just someone who does not have a financial education either because she is scared of money or just doesn’t want to take the time to learn.

For example, if you go to see financial planners, they will often ask, “What level of risk are you comfortable with when it comes to your investments?” The conventional thought is that the higher the return, the higher the risk. But the truth is (as I say in “It’s Rising Time!”), “the lower your financial intelligence, the higher the risk, and the higher your financial intelligence, the lower the risk.”

Think about it. If you tell your financial planners you are a conservative investor, they know right away that you are uneducated about investments. This gives them the opportunity to pray on your weakness and sell you whatever they want!

And as dumb as that sounds, thousands hand their money over to financial planners every year. According to a recent article in The Wall Street Journal, “the National Association of Personal Financial Advisors, a group of about 2,100 advisers… has doubled in the past seven years as more and more individual investors seek professional guidance.”

Even I can relate to this. I don’t like taking risks with money, but in the past, I’ve invested in stocks I knew nothing about, blindly followed the recommendations of a money manager and even invested in a hedge-fund deal that was too good to be true…and it was. The good news from these experiences is that I learned from my mistakes and will never invest in anything I don’t fully understand again.

Investment is not risky. It’s the lack of financial education that’s risky!

If you break it down, an investment, no matter if it’s in the stock market, a business, a property, or something else, is just an investment. It’s you, the investor, who determines whether or not the investment is good or bad for you. Now, not every investment you choose will be a winner, but the more financial education you have, the better your odds.

Plus, if you have done your research, you will know why you are making a particular investment and what is happening with the money you invest. If you just turn your money over to a financial planner to invest for you, you lose control, and…

When you lose control, your risk factor goes up significantly.

As Warren Buffet says, “Risk is not knowing what you are doing.” All of us make mistakes when it comes to investing. And most people are busy with other things and do not want to deal with complicated numbers and investments. It’s so much easier to participate in your company’s 401K or hand your money over to someone else to invest for you.

I felt the same way. But then I took the time to look at numbers differently and started seeing them as the way to my financial freedom. Once you increase your financial education, you can invest the way you want based on your personal goals. More important, you can take control over your finances and reduce the risk involved with investing.

So what’s it going to be? Are you going to be a “conservative investor” and turn your investments over to others, or are you going to increase your financial IQ, take control of your money and actually start your journey to financial freedom?

Let us know your thoughts below. And if you need help making financial freedom a reality, check out our free, financial education community here.

About williamk82

William Kohlmann is a student at Grand Canyon University’s Ken Blanchard College of Business where he is earning his Masters in Business Administration with an Emphasis in Finance while working full-time for a leading financial institution. He is an Eagle Scout from Troop 105 of Stroudsburg, Pennsylvania, aspires to be an entrepreneur, and currently lives in Phoenix, Arizona with his beautiful wife, Krystal.
This entry was posted in Advice, Diversification, Investing, Personal Finance, Risk Tolerance, Strategy and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s