Comments on: The Real Meaning of Risk

By: Curmudgeon

Curmudgeon — Thu, 23 Apr 2009 19:05:53 +0000

Um, unless the house either has a serious problem, or is likely to fall substantially in value. If you are getting it that far under “market value,” you either have a substantial inside track or, I'm sorry, you are the fool in the market. Markets aren't always efficient, and occasionally they can pay off for you, but to bet on it is always a risk.

By: musica

musica — Thu, 23 Apr 2009 18:50:18 +0000

great post. thanks

By: Curmudgeon

Curmudgeon — Thu, 23 Apr 2009 12:05:53 +0000

By: Are Investment Homes Worth the Risk? - Real Estate Investing

Are Investment Homes Worth the Risk? - Real Estate Investing — Wed, 22 Apr 2009 22:36:03 +0000

[...] when you’re considering decisions that could impact the future of your financial health. A day or two ago, they said, In real estate, the quicker you can go into massive debt, the quicker you can become massively [...]

By: M

Wed, 22 Apr 2009 20:43:58 +0000

I disagree with your statement "If you go massively into debt, what you do is you take on a massive amount of risk."

I can take a $100K loan on a house that has a market value of $200K. The risk there is relatively low; there's an excellent chance that I'll be able to sell the property, or otherwise profit from it, sufficiently to cover my $100K debt.

The amount of debt is in no way correlated to the degree of risk.

By: Chad @ Sentient Money

Chad @ Sentient Money — Tue, 21 Apr 2009 12:52:07 +0000

Not that you said it directly, but I agree the majority of people are not good at determining risk. However, I don't agree with:

"But you have to understand your tolerance for risk..."

I'm not disagreeing with the need to understand our tolerance, but with the idea that understanding our tolerance is very important. The idea of defining our tolerance has been preached ad nauseam, but it's useless because no one has any idea how to actually judge risk. A good example is flying vs. driving. Every bit of evidence proves that flying is safer, but large numbers of people are still scared to fly.

The risk tolerance thing is just another way for people selling financial products to ease people's fears without actually providing any real value.

Sorry, I know this was barely anything in your post, but it jumped out at me.

By: SJ

SJ — Mon, 20 Apr 2009 15:55:52 +0000

What do you define risk as?

What you are putting? Or the likilhoood of loss?

By: Enrique S

Enrique S — Mon, 20 Apr 2009 12:06:26 +0000

I prefer to take on huge risks only if I'm playing with the house money. If the only possible outcomes are wealth or bankruptcy, I'm sitting it out. If that classifies me as risk-averse, so be it.

By: The Real Meaning of Risk

The Real Meaning of Risk — Mon, 20 Apr 2009 11:32:57 +0000

[...] Original post by brip blap [...]

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By: GoForexYourself

GoForexYourself — Mon, 20 Apr 2009 10:41:24 +0000

You must take a risk to receive and award. The problem is when people take on a huge risk to receive a large reward to get rich quickly and it doesn't turn that way. I personally like to keep my risk/reward ratio on a 1:1 scale.