Differing Types of Risk

ABOUT THIS EPISODE

How do you feel about risk? You might be surprised. Financial experrt, John Browning, explores the two major types of risk most people face. The Risk of Loss. The Risk of Gain. The Risk of nottaking enough risk. A common risk is market timing.

Welcome to the build your life podcast with John Brownie. Build your life as a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth, with offices in Hawaii, Colorado and Illinois. John's also the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values, which you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a freak copy mild right to your door. I'm Michael Dlan, your host for the next few minutes as we chat with financial expert, business owner and author John Browning. I John Browning. I read a question for he here in second but how are you doing today? I'm doing the antastic. Yeah, but I'm doing great. I'm thinking risky today. I'm thinking one of the riskiest things I've ever done was jumping out of an airplane, and I've done that twice now with I had a parachuting but it was really cool, but it is risky. You tell me we've done in the like? What do you have a risky thing that you've ever done? Oh...

...my goodness. Well, I almost every chance I get, not quite every day, but every chance I got to get on a holdorcycle and I get on my heart lead to right it. That's well, a lot of people would say that's a risky band. That is a risky that I have. I have taken a spill on that and, you know, essentially crushed my on my left leg. So it is risky and but that's that's probably the most risk bey thing that I okay, that'll work well. The the other thing we want to talk about. I want to talk about investment type risks, risks in around investment today. That that's the topic that I want to throw your way. What can you tell me about types of risks in investments? Well, first, first risk is that people listening to this podcast might think that this is specific investment advice and it is not. I cannot give you individual investment advice on this podcast because they don't know who you are. But I would love to have you give me a call or reach out to...

...me on Guardian rockwealthcom and so I have for a free consultation. I'm not going to sell you anything. Would love just add some buy own and some help. Then I can give you potentially some individual investment advice, but this is not about that. This is just explaining some of the different types of risk that we see and maybe some misconceptions that are out there about risk. Awesome, awesome, that's great. Well, let's have a casual conversation about from a guy who doesn't know, talk to me about a couple of the the big types of risk that are out there that I need to be aware of. Well, risk is one of my actually it's not for a lot of people's one of my favorites of juelts, because for several years years when I worked on Wall Street, I was in charge specifically of the risk position at the firm and I'll never forget the one day we're doing our trading. The trading desk was crazy as always, you know, lots of phones going...

...off and everything else, and I took a phone call and he said I on the other end, I hear this is so and so, and it was the name of the person who owned the company. And of course, on a trading desk we're always joking around with each other and playing practical jokes. It just sort of the way things go. And I was like Oh yeah, right here, and I know the phone. Turns out that wasn't a great move on my belt. It was the owner of the company and question about our risk position from the previous night and he called back and luckily I recognize that this was actually so there's one type of risk the owner of your company is really calling him lasting but it did, you know, those times on Wall Street managing that risk made risk one of my favorite subjects and I find that so. There's just so many people that misunderstand what risk is...

...and with most financial advisors they will and firms they'll give you a very long, kind of boring list of questions that are generic and review like Pepperoni on your pizza, are not, and then they determine, based on the answers to those questions, what your number after whisk number is. We never put a number on anymore. At Guardian Rock will use some of those questions as well. But rather than that, it's not a just about what the answer those questions are, but it's more about there's really one or two questions that we ask that we're not just listening to the actual response. We're listening how the person says that response and not just what they say at the tone of voice that they use when they say it and we challenge some of their assumptions and it's really how a person feels about risk, frankly, and we try...

...and sometimes actually adjust their thinking about what risk is as well, and we give them some real life examples and see what their real time reaction to those real life situations that we've experienced in our time on Wall Street and elsewhere that actually happen in the market and how would they feel if that particular thing happen? And maybe it just their understand sanding of risk first, because there's really too two major types of risk, and that's the risk of being too addressive and experiencing sleepless nights and maybe experience a surprise that you didn't understand what that downside risk means, because nobody cares about the upside risks to and when you see a security or a portfolio that jumps way up in value, you need...

...to understand that, typically speaking, historically speaking, something that goes up really high very quickly can actually and often does, fall even quicker. HMM. So the markets, and we saw this in a march of two thousand and twenty, where the market drop thirty percent very very quickly. Now, it didn't come up thirty percent that quickly. Look the rest of the year and thankfully it did recover an even more so throughout, but that took the entire year. So understanding that, that's kind of the way things working. Adjusting for for what you're feelings about risk aren't also, this is a very common one, is that risk out not taking enough risk and not being aggressive enough to accomplish your goals with the research sources you have. And most people don't...

...talk about that, but it's a very real risk and either they brush over that or they try and make some assumptions that sort of make things work and make a shove it in there and and it really doesn't. It should not be brushed over and maybe they come up with an unrealistic expectation or or try and law just don't more money and when dumping more money and might not be a realistic option for the individuals. So that's a very real risk as well. And the third one that I just have to throw in there because so many people do it is market timing. My Yeah, by mean is always, and I very rarely use that word. It's always a bad idea. There is no human being. Sorry about the alarm. There say no human...

...being that can accurately consistently time the market, no matter what they say. Right. So just don't do it. But it just your portfolio. So do you don't have to write. You did right that that that is the key thing. And it's funny because market timing not always I'm sure I can. I'm you know, I'm not dug into it, but we talked to an episode ago or two about greed and all of that a little bit and and sometimes that's what always sounds means mark a time. He's like we're going to get this one to get all the games, we're going to get out. In words, it's feels like greed versus. What your strategy is is to build a portfolio adjusted over time and take advantage when you can, but don't put yourself at too much risk, because when you're at too much risk, then things internally, my emotions, go wacky right. But that's why you have to those conversations with John and his team, because I know my wife and I, we tend to be very conservative. We don't like a lot of risk. But I've got a dear friend WHO's just like throw it all the wall and see what sticks. Let's just throw it out there. Will make some more and he's totally not risk and verse at all. But...

I don't know. I'm married him, right. So it's everybody's different. But you don't know that until you find this third party person like John Browning to talk to, to understand your values in and ask some of those questions, because, I mean, investing is an emotional thing for most people and and so that's we have to we have to understand just different types of risk right, right, and raving there as it was. A lot of studies have been done and it's like from a psychological perspective, and the pain of loss is much exponentially, you more painful than the pleasure that you get from the Games that you see try and that's something to keep in mind. The other thing to keep in mind is that, and a lot of people just don't quite wrap their heads around this, is that if this if they particular security or portfolio goes down by say, ten percent just to get back to...

...even it's a little bit over eleven percent, game that you need to recover from. That understanding that is important as well. Yeah, well, and one of the other risks, and you may have mentioned it, but you you weren't as blatant as I'm going to be. Is I'm going to call it the risk of being unbalanced, and that would be if you have a portfolio but you aren't rebalancing at regularly, you're really putting yourself at risk because as your portfolio grows, it's going to become too heavy, let's say, on one segment or something. And that's what you helped your clients to do, is make sure that if something's growing, great, but we're going to, as I see take some money off the table. We're going to rebalance that and make sure you're in a safe position. Is that as that it might saying that right, you're seeing it exactly right. I'm glad you brought it up because you know, we see that all the time, and there's there's two things that happen. Is the individual says, well, I don't want to take a taxable game, I have to pay taxes on that.

I keep saying taxes is anything, it's not the only thing. And I had a we had a client that they were in a particular stock. I'm sure if I said what it was, but I won't for compliance reasons in California particular. Maybe it was a utility stock that had really appreciated. The said I don't want to take the taxable game, I don't want to pay taxes, and we try to convince them, Hey, we see some real issues with this particular security. We think it could potentially decline and value when it's a very large portion your portfolio. They just wouldn't do it and sure enough of that particular business experience the very difficult time and they lost way more than they would have had they sold it pay the taxes. Yeah, and it's really interesting to me how difficult it is for in general, for people to take games. They just think it's going to you know, well, that's obviously just going to keep going up forever, and the fact is that...

...did generally doesn't go up forever. Nothing, nothing grows to the moon, so to speak. That's right. What he ever went broke taking a game? That's right. Well, unfortunately, your client did not pay capital Games, just like they wanted to be careful what you ask for. That's right. Knot. Yeah, take the advice of John Browning, and that's why he's there. I mean that's, as I say, John That's why you make the big box to help me make those decisions right. You use your guy and follow their advice because you think. The cool thing about you, John, not where you brilliant when it comes all of this, but you are, and I'll say this night, your disengaged emotionally from your clients money. They're in it, it's their money. They've got emotions tight to you can see things from an unbiased perspective much more easily than they can, and that's the value that you bring to the table. I mean just one of the values, but you can see things that they can and you can navigate...

...them through the storms of life because you're not so emotionally charged with pain. Taxes like it's okay, but we've got some strategies here that might help, right, Yep, that's right. Yeah, okay, well, let's let this has been a pretty risky conversation. So I want to tie this up and again this is not an investment advice, this is a conversation. If you want investment advice, reach out to John Browning and have a conversation with him. Let him help you navigate really life, because I was going to say finances, but John, at what you do is it's finances, but it's much broader, because you really want people to build a life, not just a portfolio. The portfolio, the money, the assets, that all is to serve us in living a life and building the life that we really really want, once we understand our values. And so reach out to John Browning, Guardian Rock wealthcom and, while you're there, requests the copy of...

...his book, set up a zoom call with John or a phone call and have a great conversation with John Browning. John, thank you so much for a great conversation around risk. Appreciate that all right. Thank you and we'll see you next week. Money really is a big part of our lives and John Browning can help you and your family learn how to keep money in the proper perspective. It's important, but it's only a tool that could help you build the life that you want. If you'd like John Emilie a free copy of his book build a life, not a portfolio, go to John's website, Guardian Rock wealthcom, and click the contact us link and send your request. John Will Mell a copy of his book right to your door absolutely free. Thanks for listening to building your life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automagically when it's released. Have a terrific day.

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