Risk & All the money in the world

...continuted from yesterday...

…continuation of discussion about All the Money in the World: How the Forbes 400 Make--and Spend--Their Fortunes…

The authors start the chapter on risk with the statement that one cardinal rule of the Forbes 400 is that if you don’t inherit money, the likeliest rout to making a real bundle is taking a lot of risks. The authors point out that the Forbes 400 is bursing with card sharks and poker players. From the financial industry, prominent poker players include Steve Cohen, Henry Kravis and Warren Buffet.

Many Forbes 400 members mortgaged their homes as security for business deals. However, those who did and lived to talke about it did so only after carefully examining the odds of success and determining that they had a no-lose deal.

The authors quote entrepeneur-researcher Jerry White as observing that successful enterpreneurs actually take only moderate risks when risk is compared to their net worth, often as low as 2 or 3 per cent of such net worth.

Coincidentally, trader-researchers have observed that successful traders risk only 2% or less of their account equity on each trade. For example, the Turtle Traders include that as one of the rules in their trading system as described in Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders

...continued tomorrow...

Copyright 2008 Raymond T. Lee. All rights reserved.
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