Risk-taking is a part of success in investing – and in every other aspect of life as well. But taking a risk isn’t the same as betting blindly on an unknown outcome. Jason Hartman says decisions are best made by carefully weighing alternatives, examining the evidence, and heeding your own inner wisdom. Whether you’re planning to invest in real estate, take your business in a new direction, or make a move across country, detachment and consideration can help to rein in the impulses that lead to ill-advised choices.
Fear drives many decisions. Since our first impulse is to avoid fear and uncertainty, it’s easy to stay stuck where we are. Risk of any kind can seem terrifying –even if the outcome promises to be better than the status quo. But a level head and a clear vision of the outcome can reduce some of those uncertainties.
The Bible’s wisest man, King Solomon, shows us how. In the most famous story told about the legendary monarch, the king was asked to resolve a debate over which of two women was the real mother of a baby claimed by both. With no evidence to support either woman’s claim, Solomon made a cold-blooded decision: cut the child in two, and let each woman have half. Immediately, one woman offered to give up the child rather than see it killed. Solomon decided that her compassion revealed that she was the true mother, and gave the child to her.
Detachment and a consideration of the facts led to King Solomon’s decisive resolution. Unswayed by the weeping of the women or the wishes of his court, the philosopher king deliberately chose a strategy that could lead to the right outcome.
In investing, as in life, the King’s approach can be helpful. To avoid impulse decisions and minimize the risk that comes from leaping before looking, it can help to do some detached research first. Educate yourself as much as you can about the situation. If you’re weighing a decision such as buying investment property, for instance, it pays to learn everything you can about the market and the area where you want to buy.
Take a detached view. You’re debating making a move that could lead to a better financial future, but you’re conflicted. Step back from the emotional aspects of the situation. Weigh alternatives and examine your options. Although others may be involved in your decision, take some time to step away and consider your own perspective, away from voices from outside that may be pressing you to make the decisions they want you to make.
When you’ve weighed all the information and listened to your own counsel, it may be time to take that final step: the risk, the decision, the step off the precipice that takes you in a new direction. While your course of action may not be as dramatic as proposing to slice an infant in two, it’s important to follow it through, expecting that you’ve done all you can to point yourself toward the right outcome. Fear of risk can be paralyzing. But as a wise man demonstrated sometime around 950 BC, it’s possible to bring a clear head and eye to any decision you have to make. Top image: Flickr/AhrondeLeeuw)
The Solomon Success Team