“What Doesn’t Kill You Makes You Stronger” – Fredrich Nietzsche 

Caution usually prevents us from making mistakes or avoiding danger. Risk and caution can resemble a tug of war, with shared victories and losses. A calculated approach allows you to keep your balance and poise when all about you is carnage (picture an “Orcadian Strip The Willow” at a church ceilidh!).

Sometimes people advise throwing caution to the winds. Taking risks can bring unexpected results. Think back to the first time you asked someone, or someone asked you, out. Sweaty palms, increased heartrate, the possibility of rejection, they may not show up, the date might be a disaster. But was it a risk worth taking?  

Perhaps a better question is, “What if you hadn’t taken the risk, what would you have missed out on?” In my case, forty years of marriage, three outstanding kids, and a growing tribe of grandkids. Was it worth enduring all we have been through? I’d have to say emphatically, “Yes!”.  

Garth Brookes’ brilliant version of Tony Arata’s song “The Dance” comes with a story attached. The song was turned down by every artist it had been pitched to. Garth was in the Bluebird club when Tony sang his acoustic version and was captivated. The song describes the story of a couple whose life doesn’t quite go to plan, there’s heartache and reconciliation. The writer comes to the realisation that if he’d known what was going to happen and opted out, he would have missed all the pain, but also missed “the dance”. Sometimes it’s worth sticking with it as the outcome will prove to have been worth it. 

“A mousetrap always provides free cheese” is a quote that made me smile. It reminds us that there are rewards available for risk-takers. When it comes to investment you need to be sure the risks are worth taking and that you are suitably rewarded. Markets are unpredictable. Risk can’t be totally avoided, and so part of our role is finding ways of managing risk and insulating clients from market extremes. 

When we construct an appropriate risk and return balance for each client, we apply a triple layer of caution to our planning considerations: – 

  • Firstly, when establishing each client’s willingness, ability, and need to take risk – we err on the side of caution, not pushing clients to take more risk than necessary. 
  • Secondly, our investment portfolios are built around expected, historic levels of risk and return which we round down – adding some additional “cushioning”.  
  • Thirdly, we take a prudent approach to projected inflation rates when calculating expected return for our portfolios.  

Sometimes a period of stress is required to demonstrate the resilience of a process, and the last two years have again tested ours. Cashflow models proved robust and delivered within expectations. We now have further evidence that our investment approach works in practice and not just in theory.  

Risk and reward, or no risk no reward. Doing nothing can be more risky than taking a measured, calculated approach to risk.  

Care to dance ?