Begin at the beginning and go on till you come to the end; then stop - Lewis Carrol, from Alice in Wonderland Like the White Rabbit in Alice in Wonderland, sometimes we are unsure of the correct action to take in order to increase our financial success.
Sometimes we read in the press that such-and-such person made a large sum of money investing in stocks, options, or currencies, and we wonder if this is something that we should invest in too.
Other times we read about people that do internet marketing, and how much money they are making while they sleep.
Yet, other times we read about others that are buying gold as a hedge against inflationary pressures! It's no wonder that the average person on the street is confused about what to do! Having said this, if we look at all the ways in which people are increasing their wealth, we see a common thread: In order to succeed financially in this day and age, we must be prepared to handle risk, and we must be able to act correctly even when not all the facts are available to us.
How can we learn to handle risk correctly? If we follow a simple four-step process we can minimize our downside and maximize our potential profits: 1.
Determine what are the probable outcomes of our decision.
Understand both the positive and negative potential results.
2.
Having done step one, and looking at the potential upside-downside trade offs, decide which risks we are comfortable with and willing to accept.
3.
As you embark on whatever action you've selected, constantly measure what results you are achieving, paying special attention to any signs that the decision may be more volatile than we originally thought.
4.
Using your measurements from step three, tweak and calibrate your actions to get back in line with your original plans.
These steps sound simple, and even common sense, but you'd be surprised how many people fail to follow them.