Ch 5: More vs. Enough (Part II: budgeting, 3 of 3)

[AzmodanKijur]

I was just wondering as I listened to your discussion here, as to whether you address the basis of risk management when it comes to the idea of investments and debt management. From a corporate point of view, it is always better to engage in ventures with some measure of risk as risk tends to be attached to rewards. As well, a corporation actually requires debt to operate effectively. People hear of companies with billions in debt and think it bad, but it is actually good for that company.

[AzmodanKijur]

However, on the personal level, debt is generally not good and risk can be a substantially dangerous thing that it should be avoided. For example, when you refer to investment, most people immediately think "stock exchange". You might do well to clarify that for the average joe on the street, the stock exchange is the last place that you want your money. The system that allows investment into public companies is one that is angled toward very large scale investors - people with millions to spend

[AzmodanKijur]

These people have a large tolerance for risk, but the average joe does not and cannot have the same.

I have always thought of investments in stocks like this: Take the money you would invest in that company over there and place it all in your hand. Now, take up a lighter and flick it on. Now, set that money on fire. Can't do it? Then you shouldn't be investing in stocks. Stocks are much like gambling. You might win but you might lose and when you lose, you usually lose it all.

[AzmodanKijur]

Investing for the average man should be made in secured vessels - vessels with lower risk levels. Government bonds and guaranteed certificates are generally the better avenues for such things. It all has to do with ones risk aversion level. While some are willing to take rather large risks, they should be cautioned against it. For every 1 person that makes a "killing" on the stock markets, 1,000 lose their shirts. Where do you think that one guy got the money? :)

[ToddGates]

1 of 2:

> However, on the personal level, debt is generally not good

Agreed!

> the stock exchange is the last place that you want your money.

When it comes to what I refer to in my videos as "Levels 1 -- 3" ($ for bills, unexpected expenses, an emergency fund), I agree.

But when it comes to large expenses that are decades away (retirement, college tuition for someone under the age of 10), I don't rule stocks out. The stock market has historically earned about 10%--

[ToddGates]

2 of 2:

--but that's *only* if you can keep your money invested long enough to ride out the market's highs and lows, and don't have the type of personality that gets too upset when the market crashes or gets too manic when the stocks soar.

But investment advice varies wildly depending on individual circumstances and individual temperament . . . I figured out what works for me, but I won't venture into the wild world of trying to offer specific advice to others.

[ToddGates]

1 of 3:

> I was just wondering as I listened to your discussion here, as to whether you address the basis of risk management when it comes to the idea of investments ...

I don't go into too many specifics, because I don't want to lose the momentum that I feel I gain from giving just broad overviews of subjects like why we have to work, why we have to use money,

[ToddGates]

2 of 3:

the pros & cons of our alienating modern workday, why people should budget, re-visiting the measure of "success" (etc.) and explaining how these all tie together.

Each of the six chapters of my book "Hunting, Gathering, & Videogames" (which are the basis for the six video series I have planned for this channel) introduce subjects that are book-length in their own right, whereas my book is only 60 pages in total.

[ToddGates]

3 of 3:

People will have to look elsewhere for the fine details---but it's my hope that I'll introduce the importance of researching those fine details (especially as the details pertain to people's individual circumstances), and that my book will help readers fit that new knowledge into the larger framework of the roles that work and money have in our lives.