Understanding Risk vs. Reward: How Much is Right for You?

Got a great question yesterday that I just had to answer on today's show. Ralph, I get that investing can grow money, but the risk makes me nervous. How do I know how much risk is right for me? What a great question.Question I hear at least once or twice a week and it's a question I want to answer today because maybe you're listening or you're watching right now and you're wondering that very same thing. This market makes me nervous, Ralph. You're talking about investing all month, but this makes me nervous. So here's my promise for you today.Today I'm going to teach you why risk and reward always go hand in hand. I'm going to show you how to balance risk with your goals and peace of mind.And last but not least, I'm going to show you how to approach investing with wisdom and not fear. It's going to be a truly great show today.This is Financially Confident Christian, your daily dose of gospel, grounded insight and faith driven tips to help you break the cycle of financial shame with confidence. Hi there, welcome. My name is Ralph. Thank you for joining me on another daily episode of Financially Confident Christian.Now, if you missed yesterday's episode, we talked about how investing is not just for the rich and you could start with as little as $25. If you have missed yesterday's show or you missed any of our shows in this series, you can find all of our shows at our website.That's financiallyconfidentchristian.com as an accountant and a coach, I've worked with people over 30 years and I've walked alongside of people who froze up because of fear, especially when it comes into investing. Then I've also worked with people. Man, they just jumped in the pool completely recklessly. Kind of like we talked about yesterday.Are they throwing that money in a market as a gamble? And here's a brutal truth. In my experience, neither of those extremes really works. It's all about finding balance.When you can find that balance, that's when confidence grows. And that's really the big takeaway from today's show. Let's talk about how to find that balance.Because once you find that balance, you truly can have peace in investing. Tell you about a young couple that I work with. They came in and sat down with me. They were really getting themselves started in life.They had just gotten married and they said, Ralph, we really want to get some ideas for investing. And I said, that's great. I'm so happy that you're energetic about that.Next thing you know, the husband says to me, Ralph, I keep hearing stories from friends at work to tell me about these things that are growing, they're doubling overnight, Ralph. And we want to get involved in that. This is what we want to do. And I said, well, hold on a second. Let's talk about risk. Let's talk about reward.I'm going to talk about that a little bit in a second. But I sat down with this couple and I said, let's talk about this. Let's. Let's kind of hash this out a little bit.Well, this guy did not want to hear what I had to say. He said, Ralph, listen, I can't afford not to take this risk. This is a sure thing. Made me think of going to the racetrack. This horse is a sure bet.Well, fast forward a little bit, because then the market dropped. And I remember the wife called me. She was completely in panic.She says, my husband just sold all the stock and they lost more than they ever would have imagined. They lost more even if they had just stayed in the market and they learned a valuable lesson. And I want to share that lesson with you today.It wasn't about the market. See, the market will come and go. The market will ebb and flow. That's not what the issue was with this young couple.That may not be the issue that you've experienced if you've tried investing. So. So many people have tapped their toe into the water and they felt that water's pretty cold, Ralph. I'm not going there again.But it's all about knowing your comfort level. And friend, as I said before, knowing your balance is really everything. So here's the thing I want to start off.First thing you've got to understand, risk and reward are always connected. That is just the truism of investments. If there's low risk, there's going to be low reward. Think of savings accounts. There is absolutely zero risk.Now, of course, there's the risk that your bank could go under if you got more than a certain amount of money. But generally there's no risk. Same thing with government bonds. Most people think that the United States is going to continue on.So government bonds have low risk, but the problem with that is they also have low reward. Well, the opposite is true as well.If you want to take high risk, sure, there's a potential, and I use the word potential because we got to be careful about this. When you take that high risk, there is a potential for higher rewards. And think stocks.Think real estate, speculative real estate investments or business ventures. But here's the brutal truth we got to start with, you can't separate the two. There are no low risk, great reward or high risk, low reward things.They just don't exist. So you got to start off with that basic understanding. Those two go hand in hand. Low risk, low reward, high risk, high reward.You may be saying, okay, how do I make a decision? Well, here's the thing I want to tell you right now.So many people think, well, I'm going to go listen to this financial guru because he's going to have the right answer. Well, guess what? I've been doing this for 30 years and I wish I could tell you this, but there is no one right answer.The answer depends on your particular timeline. It depends on your goals. And ultimately it depends on your comfort level.See, what's risky for one person might be completely manageable and acceptable for somebody else.One of the things that I work with, a financial advisor, the first thing he does whenever he meets with one of the clients, I refer to him as he says, I want to assess their level of comfort. I want to understand their market risk.I need to understand their timelines, I need to understand their goals and ultimately build an investment plan that meets those three things. And what's good for one person might not be great for another. I've got clients that only invest in certificates of deposit.The bank, they don't want to take any risk. I have other clients. If I said to them, go buy a CD to be like Ralph, are you crazy? There's no return in that. And they are in the stock market.But here's the thing I want you to also understand truly finding wisdom, that wisdom that the Bible talks about. I'm going to talk about a book of Scripture here in a second. But finding wisdom means you find that balance.You find what works for you, what works for your timeline, your goals, and your comfort level. Let's look at the Book of Proverbs, chapter 22, verse 3, the prudence, see danger and take refuge. But the simple keep going and pay the penalty.See, investing doesn't mean avoiding all the risk. If you're going to invest, there is going to be some risk. I'm going to be very clear about that right now.When you put money into the market, it is not insured. There is risk, but it means knowing yourself. It means knowing what you can tolerate.Hey, if you're one of these folks that can't tolerate risk at all, then you probably are better off investing in CDs or government bonds. But know yourself and choose the path that brings you Peace. Because you don't want to live someone else's life.You don't want to live in somebody else's investment belief system. Now, there are practical steps to help you find that balance.One of the things you've got to ask yourself, and it's one of the big things I ask clients as I work with them. Now, listen, I've said this on the show a couple days ago.I don't actually buy investments, but what I do is I coach clients on how to get involved in the market and how much to allocate for that, what the tax implications are, that. But the first thing you've got to ask yourself is, when do I need this money?If you need this money short term, hey, you've got to take low risk on that thing. You don't have the opportunity for this money to grow and recover.Now, if you're saying to me, Ralph, look, I'm putting money into the long term, you can take more risk. But test yourself with this. Ask yourself if a 10% drop would keep you up at night.If that 10% drop in the market is going to keep you up at night, you need a safer mix. That is a very conservative approach. Then start small and build that confidence as you go.But ask yourself, when do I need the money and what is my risk tolerance? And then really, really ask yourself, if I saw this market drop, would I feel safe with this?Here's another thing you got to remember, and this goes beyond all the investment, and this is really the assurance of today's show. You got to remember who holds your future. At the end of the day, your security isn't in the stock market. Your security is not in those investments.It's not in those certificates of deposits. It's not in how much you've got deposited at the bank. And I want you to hear this, and I want you to hear this loud and clear. It's in God's hands.That is truly the thing that should make you feel reassured in all of this. I'm not saying don't make wise decisions. I know God wants us to make wise decisions.So when you invest with wisdom, when you invest with faith, when you do those things, you can walk with peace even when the markets shake. And guess what? The markets will shake. But where is your peace? What is your anchor in that? Let's pray together. How does that sound?Lord, we just thank you for teaching us that risk isn't something to fear. It's something that we can manage with your wisdom. Lord, so help us to see clearly what risk we should take and which ones we should avoid.Lord, give us peace when we make those investment decisions.Help us to be clear in our decisions and faith in what you hold for our future, knowing that our true future, our true wealth is found in you and found in you alone. And we asked this in complete confidence in Jesus name, Amen. Now I sure hope you join me tomorrow. We're going to take this even a little bit further.We're going to delve into a little deeper. What's your investment horizon?We'll talk about short term and long term goals and then I'm going to talk about how you can shake your timeline and shape the way you want to invest. Because that's going to be a really important point once you've made that decision, hey, I'm going to get in the market.I realize it's not just for rich people. I'm going to put my toe in the water. But then we really need to get into that short term versus long term goal.So make sure you don't miss tomorrow's show. And if risk is keeping you frozen, I would love to give you a copy of my free book. It's called How to Become a Financially Confident Christian.I wrote this book, it was a passion of mine.I, I took 30 years of working with people just like you and seeing that fear, seeing that financial shame they lived in and helping them build confidence. And I would sure like to give you a free copy, a downloadable copy. You can go right to my website and get that.That's at financiallyconfidentchristian.com/becoming go there and put your email address in and download a copy of the book. Again, that's at financiallyconfidentchristian.com/becoming it's my gift to you because here's the truth.Confidence comes from truth and the truth will set you free. So go today and be that financially confident Christian that I know you can be. I truly believe in you. Believe in yourself.And more importantly than any of those things, God believes in you. Stay financially savvy, God bless you and you have a great day. It.