?Only those who will risk going too far can possibly find out how far one can go.? – T.S. Eliot
The instinctive tendency is to hide or take cover during financial crisis. But, to the contrary, analysts say this is the perfect time to take risk and invest in new enterprises.
“Risk is a good thing – it promotes growth,” says former investment banker Heather McGregor. Harvard professor Dr. Kenneth Rogoff also echoes the same advice: “In 2006, even Americans out of work were prepared to take big financial risks.”
Warren Buffett, the legendary billionaire investor,?does not see any danger; he insists on investing in reliable stocks. ?If the world were falling apart I?d still invest in companies,??he says.
The underlying assumption is that the economy needs entrepreneurs, and requires governments to provide incentives for people to go out and take more risks – investing in ideas and services which could potentially grow and create more jobs.
GOOD LEADERS & RISK AVERSION
Good leaders generate optimism, says Gerald Ashley, a?risk management consultant. According to him, good leaders are required to ratify the risk and ring in more opportunities. The calibre of leadership should be forward looking, providing necessary infrastructure and education. He reckons Margaret Thatcher in the UK and Ronald Reagan in the US were examples of leaders who have been zealous to put tremendous energy into their economies by reinvigorating them.
The actual problem arises from credit rating agencies that set a tone which affects consumer confidence and risk-taking. Despite the negative mood, there are still entrepreneurs who are willing to take a risk.
For an opportunist, risk is an opportunity. Dr Rogoff, who agrees in principle says: “Risk is definitely all about entrepreneurship and capitalism while trying to maintain some semblance of equality, and that is a balance we have to strike better.”
According to Ashley, there were optimism clubs in 1930s to brave out the financial crisis of 1930s. “The Chinese character for risk is made up of two characters – danger and opportunity,” he added.
The economic slowdown is in need for jobs and the majority of them will probably be provided by small and medium sized enterprises. Many investors are motivated by the prospect of making a profit.
The outcome for an investor can range from losing initial investment, getting money back, or making a huge profit. The important thing for potential first time investors is to remember that difficult economic time is only a temporary period. There are good measures for an investor to reduce long-term damage to net worth, even during times of an economic downturn. In fact, it should be remembered that the goal of investment is not to make ?quick money?, but to build a solid financial foundation for the future. Whatever the outcome, success is a combination of intuition about the market and people.