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How to Reduce Risk while Wealth Building

01 Avoid “Magpie Syndrome” 

Investing is exciting and there’s always new opportunities, so it’s easy to chase after every possibility to build wealth. But every opportunity isn’t a profitable one. 

Avoid chasing every shining opportunity like a magpie by having an investment plan. Your plan will eliminate options that won’t help you toward your goal. 

Some of the elements of your investment plan should be: 

  • Type of investments 
  • How much you need to replace your income 
  • Annual investment goals 
  • How much could a potential investment make 
  • Contingencies for a potential investment 
  • Exit strategies for potential investments 
  • Timing for adding new investments 

02 Follow the numbers

Now that you have a plan that tells you what type of investments you’re going to make to reach your financial goals, evaluate the numbers for each potential investment.  

Whether it’s a rental property, a land subdivision, mutual funds or stocks, the numbers will tell you if the specific opportunity is worth the risk.  

This is where your emotions need to take a back seat. Let the numbers speak and listen to them. 

If you need help reviewing the numbers for a potential investment, contact an investment adviser or contact us to get connected with one. 

03 Get rid of debt first

Debt is attractive because it gives you instant gratification. But just like having one too many on a night out with the girls, it’ll come back to bite you later.  

Personal debt slows down your wealth building capability because all your money is tied into paying interest. On top of that, the amount of debt you have increases risk because it means you’ll have a larger amount of financial responsibilities if an unexpected event happens and your income decreases or is lost. 

Make your goal to have no personal debt, including your mortgage and short-term debt, so your savings toward investments are high and your financial liabilities are low.