risk

Aggressive Is Not Risky!

Investors often mistake aggression for risk. Like a well-timed play-action pass, captive insurance is an aggressive strategy that actually reduces risk.

The Play-Action Pass

It's second down and three at the thirty-five yard line going in to score. Your team has been running the ball very well. It is the perfect time to be aggressive and call a play-action pass.

Calling a play-action pass in a football game AT THE RIGHT TIME is being aggressive. A play-action pass at the right time and situation is not risky. In fact, with proper execution the worst case is an incompletion and no loss whatsoever.

Often times investors mistake aggression for risk.

Football strategy illustrating aggressive vs risky
Being aggressive at the right time is strategy, not risk.

Stereotypically, along with the prospect of higher returns, aggressive investments also carry a higher-than-average risk of losing some -- or all -- of the money you invest.

When Is the Proper Time to Be Aggressive?

  1. When the time is right. The right timing is 2nd and 3. The wrong time to take risk in your investments is when you are behind by two touchdowns and everyone knows you are going deep.
  2. When there is a tangible reward for your risk. One of my clients liked risk. He was taking risks based on that reason alone. He was risking his entire portfolio without any real chance of scoring a touchdown. With the appropriate adjustments, now this client is aggressive, but not risky. He is being rewarded appropriately.
  3. When you can afford to lose. When an investor has the majority of his investments safe and secure, then it may be appropriate with a small percentage of his or her investments to go for the touchdown. Many successful investors became that way by taking a chance. Not by being risky, but by being aggressive.
  4. When you have the right tools. Individuals who have a team full of talented players that are working well together as a team, with a quarterback that makes good decisions, then opportunities to be aggressive in a variety of situations become available to that individual.

Captive Insurance: Aggressive, Not Risky

Here's a case scenario: A business owner re-allocates existing business assets significantly reducing risk of the business, or formally protecting exposures previously informally self-insured. Protecting what is most important is like adding an extra tight-end and fullback into your offense. Captive insurance sounds risky. In fact, captive insurance reduces risk.

Aggressive does not mean risky. It's second down, after faking the ball to the runner, the quarterback then delivers the pass and the tight-end easily catches the ball for a big play. The reward of being aggressive at the right time, while really not taking any risk at all creates success. As an investor, be aggressive, not risky.