Just why is Embracing Risk so difficult?

Sir Issac Newton : mathematics and physics genius.

Let’s cast a glance at his market record.

Bought 20,000 Pounds worth of shares in the South Sea Co. around the year 1720, when the scrip was at its peak. Company went bust.

After having bought into this company at a ridiculous valuation, Sir Issac chose to sit on his investment rather than embrace a small loss in the first leg of the decline. The loss became bigger and bigger, till all was lost.

In our society today, parents push their kids to emulate Newton as far as brain-power goes. Newton has been a classic winner in the eyes of society. Kids are taught to win from the beginning. Losing is taboo.

When a straight A candidate enters the market, he or she gets a rude shock. Here is a world where losing is bread and butter. The straight A candidate is likely to get hammered.

A winner in the markets knows how to lose. He or she loses many times. But loses small. Then come the wins. They are not booked small. They are allowed to run.

This concept goes against our basic programming. When we show a small profit, we want to book it and run. It is an ingrained reflex.

When we are losing, we wait to catch up and start winning instead of embracing the small loss and moving on. Also a natural reflex.

Thus, embracing risk is a very difficult thing to learn.

If one can’t do it after many losses, one should leave the markets alone.


One thought on “Just why is Embracing Risk so difficult?

  1. Unnati Worah says:

    NO COMMENTS……………………………….
    HOPE….the next market takes a while to understand the bull fights.(REST/PERIOD)

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