💰 The Only Risk You Shouldn't Take

I want to begin this week’s article by sharing the story of Jesse Livermore, also known as the "Great Bear of Wall Street."

Livermore was a famed early 20th-century trader who made and lost several multi-million dollar fortunes throughout his life. He was known for his aggressive and risky trading strategies, which initially led to his immense wealth. Livermore successfully predicted the stock market crashes of 1907 and 1929, making a fortune each time. After the 1929 crash, he was worth $100 million, equivalent to about $1.5 billion in today's dollars.

However, his tendency to take on enormous risks eventually led to his downfall. He was heavily leveraged and often relied on gut instinct rather than careful analysis. He also had a lavish lifestyle and was known for his high spending, which put additional strain on his finances.

Despite his earlier successes, Livermore eventually lost his entire fortune. By 1934, he declared bankruptcy for the final time. Unable to cope with his financial losses and personal issues, Livermore tragically ended his own life in 1940.

If you want to protect and grow your accumulated wealth, never invest all your money on a single high-risk venture.

Why?

Because staking everything on one venture leaves you vulnerable to a complete financial wipeout. If the venture fails, you lose all that you've worked hard to accumulate. Your financial stability is at stake, and with it, your goals, dreams, and aspirations could be shattered. The impact can be devastating, leaving you in financial problems that are hard to climb out of.

If you make the mistake of staking everything on a single high-risk venture, you might also face:

• Bankruptcy: You could lose all your assets and face a long, complex legal process to discharge your debts.

• Mental health issues: The stress and anxiety from financial ruin can lead to depression and other mental health problems.

• Strained relationships: Financial stress can strain relationships with family and friends.

• Career setbacks: If your reputation is tied to your financial success, your career could suffer.

I once made this very same mistake.

I was once caught in the allure of high-risk, high-return ventures, much like the legendary trader Jesse Livermore. Just as Livermore did, I put all my eggs in one basket, disregarding the concept of risk management.

The venture I had invested in collapsed, and the fallout was catastrophic. I lost my savings and had to start from scratch. I believed I was making a smart, calculated risk, but it turned out to be a reckless gamble that cost me dearly. It was a painful and shameful, hard-earned lesson.

Which is why I want to share this with you.

Instead, diversify your investments and manage your risks prudently.

Looking back, I would have spread my investments across different sectors and asset classes. You should do the same. By diversifying, you're not only spreading the risk but also creating multiple income streams that could cushion you if one venture fails.

When you make this decision, life can look considerably different:

• Financial stability: Diversification can provide you with a stable income, even in volatile markets.

• Peace of mind: Knowing that a single failure won't wipe out your wealth can give you peace of mind.

• Financial freedom: With a balanced portfolio, you can generate enough income to give you financial freedom, allowing you to pursue your dreams.

• Legacy: You can build a financial legacy for your family, providing them with long-term security.

It's important to me that you learn from my mistakes because I don't want you to go through the hardship I experienced. I would still consider myself lucky for having my health and my youth as my assets to help me recoup my losses. If it happened to me in my Golden Years, it would be extremely challenging for me to get back on my feet.

I want you to achieve financial success and stability, to realize your dreams without the specter of financial ruin hanging over you. Remember, in the world of finance, no risk that can wipe you out is ever worth taking.

Managing risks when it comes to investments can be tricky.

While diversification is one of the best time-tested strategies to manage risks, there are other behavioral factors that influence a person’s risk-taking capacity.

I’ll share more about it next week.

Whenever you’re ready, here are two ways I can help you:

• 1-on-1 Personalized Coaching: A three-session coaching program where we’ll discuss your financial goals, build your own money management system, improve your money habits and guide you on how to invest on your own.

• Group Coaching: Four live 60-minute zoom calls that will guide the students on the step-by-step guide to improve their finances.

Learn more by scheduling a 15-minute discovery call here.