Behavior #4: Prefer the guaranteed to the speculative

Wealth

Jan 16

Flowing from the concept of “defining ‘enough’ at the outset”, the Financially Enlightened aspirant should always be aware of three components of their personal investing strategy: their overall financial goal, their timeline to need, and the rate of return needed to get there.

They should then limit their investments to the universe of options that meets these parameters.

Should the timeline be long enough and your overall goal small enough, the needed rate of return falls accordingly, placing you in the realm of (nearly) guaranteed investments — those that will return what you need with a high probability of success, and by definition, minimal risk. Ensconced in these investments, you will sleep well at night, nearly assured of meeting your financial goals.

If instead you fail to define your parameters of goal, timeline, and rate of return, you’ll introduce a remarkable and dangerous default: the pursuit of “more, quickly” rather than the pursuit of “enough, reasonably”. This approach demands the shortest possible timelines with the highest potential rates of return, placing you in the realm of speculative investments and snake-oil financial schemes — those that promise spectacular returns alongside a commensurately high risk of loss. This route is as dangerous as it sounds, both to your Wealth and to your ability to sleep soundly, and will put you on a roller coaster bound for either profound success or profound failure (with the latter more probable than the former).