The Business of Risk Management
Just applied to withdraw another USD200 for this monthly payout. Unlike some of my fellow investors, who aggressively market this product to gain from the binary payout option (investors also gain from the payouts of those below them, in a form of MLM), my insistence on telling my prospects of the risks involved in this product (and the nature of investment products) mean that my leverage has not been as good as those who roped in tons of downlines.
I am fine with that, but am also frustrated at how many of my fellow men could not see the importance of a salary hedge, could not see how the risk of losing the USD1300 is actually less than the risk of not investment (it is a mindset issue), and could not see how an investment product, while different from a health product, is still a viable product after all.
Risk management itself is an important part of modern financial prudence. Why do we pay to buy insurance, in the hope that we do not need to use it? The concept of risk management comes into play here. We can risk the SGD200+ we pay every month to cover our family, so that a sudden medical bill of SGD200,000 does not wipe out everything we have. The insurance company gains from the fact that, when pooled together, the probability of having to pay out a certain amount is acceptable enough for the money they gain from the premiums paid (which is used in investing in the money market, stock market and other instruments). The insurance company's financial capabilities meant that they can afford to pay out a sudden SGD200,000 and gains from providing the risk management service to us.
Many readers may not be aware, but even casinos run on the same theory of risk management. A casino has the financial capability to lose a large amount of money at one go (someone struck a jackpot) and to gain from providing a service of giving a thrill to those who wants to strike that jackpot. The gambler, on the other hand, finds losing a couple of hundreds or thousands acceptable in order to derive their fun from playing for stakes, for a chance to win big. Obviously, the issue comes from gamblers who go on margin (borrows heavily in a way he cannot afford) in order to stay in the game. The issue of gamblers is also the reason why I want to be upfront with prospect when it comes to discussing my present investment.
Risk management is an important part of our financial life. Are we practising it?
Sensei Michael can be contacted if readers are interested to find out more about the investment product he is currently involved with.
I am fine with that, but am also frustrated at how many of my fellow men could not see the importance of a salary hedge, could not see how the risk of losing the USD1300 is actually less than the risk of not investment (it is a mindset issue), and could not see how an investment product, while different from a health product, is still a viable product after all.
Risk management itself is an important part of modern financial prudence. Why do we pay to buy insurance, in the hope that we do not need to use it? The concept of risk management comes into play here. We can risk the SGD200+ we pay every month to cover our family, so that a sudden medical bill of SGD200,000 does not wipe out everything we have. The insurance company gains from the fact that, when pooled together, the probability of having to pay out a certain amount is acceptable enough for the money they gain from the premiums paid (which is used in investing in the money market, stock market and other instruments). The insurance company's financial capabilities meant that they can afford to pay out a sudden SGD200,000 and gains from providing the risk management service to us.
Many readers may not be aware, but even casinos run on the same theory of risk management. A casino has the financial capability to lose a large amount of money at one go (someone struck a jackpot) and to gain from providing a service of giving a thrill to those who wants to strike that jackpot. The gambler, on the other hand, finds losing a couple of hundreds or thousands acceptable in order to derive their fun from playing for stakes, for a chance to win big. Obviously, the issue comes from gamblers who go on margin (borrows heavily in a way he cannot afford) in order to stay in the game. The issue of gamblers is also the reason why I want to be upfront with prospect when it comes to discussing my present investment.
Risk management is an important part of our financial life. Are we practising it?
Sensei Michael can be contacted if readers are interested to find out more about the investment product he is currently involved with.
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