What’s Your Risk Tolerance?
I have a group of friends who meet once a month and play Texas Hold ‘Em Poker. We pay a small amount each month (currently $60) and accumulate points throughout the year. At the end of our Poker Season (August-May), the top 8-10 players from our group of 20 receive funds for a $1,000 Buy-In at the World Series of Poker in Las Vegas. The remainder of the group generally receives $150 to enter a small tournament. The WSOP begins in late May and ends in mid-July, culminating with the Main Event.
My wife and I will be in Vegas having a good time with friends, and I’ll be playing in one of the Poker events when this article goes out for distribution. Who knows how well any of my friends or I will play, but I do know that it will depend on our skillset, luck, and our “risk tolerance.”
What does Risk Tolerance mean to you? Well, the first question you need to ask yourself are “What do I have to lose?” The follow-up question would be, “Am I willing to lose it?”
In the insurance world, your advisor(s) will help you determine how to protect your assets, no matter which line of insurance you’re dealing with; however, we cannot control your risk tolerance—that’s up to you. We can only give you advice and offer the right coverage and products to help protect what you have. The advice we give to a young couple starting their lives following college will most likely differ from a seasoned couple who is likely to have more assets to lose. However, I’ve learned to never judge a book by its cover. With that said, I train our team to always ask open-ended questions.
The older gentleman in overalls driving up to your office in a beat-up truck could end up owning 20 rental homes outright that he wants you to insure, and a young professional with a large, beautiful home and luxury cars could do the same. The difference is determining the current debt of each client and making the right choices for each of them. That young professional might be leasing his vehicles and be upside down with his beautiful home. Asking probing questions is the only way to determine the best course of action to protect our customers’ assets; however, our customers need to be honest with us so that we can help.
Understanding your risk tolerance is an essential part of financial planning. It reflects your ability and willingness to endure fluctuations in the value of your investments. Risk tolerance varies from person to person and depends on factors such as age, financial goals, and personal circumstances. By assessing where you stand, you can make informed choices that align with your long-term objectives and peace of mind.Risk tolerance is a concept that transcends poker and insurance—it’s a determining factor in almost every decision we make, from financial investments to personal relationships. It’s about balancing potential gains with potential losses, and it requires introspection, honesty, and sometimes, a leap of courage. For instance, a person deciding to launch their own business must assess whether they are prepared to face the inherent uncertainties, such as fluctuating income, market challenges, and the possibility of failure.
Call your local insurance professional today to help you determine your risk tolerance and to properly protect your assets.
Don’t have a local insurance professional? Please consider contacting the Craig Davis Family Insurance Agency. The Craig Davis Family Insurance Agency has been proud to be serving customers in the Temecula Valley since 1990. Please feel free to reach out to us for All of Your Insurance Needs. We can be reached at 951-699-1776 or visit our website at craigdavisfamilyinsurance.com/.
*This article was originally posted in The Valley Business Journal
