Make sure our risks are calculated ones, minimise losses if it happens

I attended a Communication and Leadership retreat recently up in the beautiful Penang Hill. Yes, the cable car is now faster than the old and could carry more! The parking was grossly expensive but at least now we have a proper place to park instead of along the road haphazardly. I recommend strongly that any visitor to Penang should take a ride and enjoy the spectacular view. Else, please do not say that you have been to Penang. Yes, I think I am qualified to say this as I have stayed in Penang for 15 years before moving to KL 3 years ago. One major topic shared during the retreat was on how to manage change and how success in future depends on what we do or did not do today.

This brings us to our main topic for today, handling potential bad happenings. One of the speakers shared about all the potential bad things that could happen and what we could do in advance to minimise the potential destruction. Although I was listening intently, I could not help but wondering what would have happened if my first property was a wrong decision. Then, I got my answer. I think I managed it, together with my wife.

Assuming that first property I bought was not loved by many and that the prices did not change much, what was my loss? Actually, it was manageable because without that first property, I would have needed to continue renting a place anyway. My rental then was RM550. My mortgage repayment was RM750 per month. Including the maintenance and sinking fund, it should come to around RM900. using extremely simple calculation, my ‘loss’ was merely RM350 per month. I could handle this loss! That’s why my personal opinion has always been to start the first property buying for our own home. In this way, we would already be taking a calculated risk and minimised that potential of daily headaches when we could not rent it out or sell it because of  soft market conditions like…. today.

It’s definitely applicable to every investment that we do and yes, this is also similar to the question many trainers have been sharing. “What’s the worst that could happen?” If we are able to answer calmly, then I think we have just passed the ‘calculated risk’ stage. However, if the answer is extremely negative and there’s the potential for us to lose everything or even set us back many investment years, then a second opinion would be extremely helpful. Make sure our risks could be calculated. This big picture tend to help us decide better as well as minimise the potential losses if it do happen. Cheers.

written on 4 Sept 2016

Next suggested article: When we do not know enough, it’s more gambling than investing

 

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