A Guide to Financial Risk- An Interview with William Bitters
No big reward comes without risk, right? Easier said than done, especially when your money is involved. For most of us, we’d rather not put our hard-earned dollars at risk, but sometimes, taking financial risks can get you far ahead of the game!
The tough economic time in 2008 is still a lingering, not to mention, an unpleasant and lasting memory. As a result, people are still apprehensive about taking large financial risks — and that’s totally understandable. However, leaving your cash in a savings account isn’t the most plausible way to grow your money.
In order to get ahead financially, you’ll eventually need to face risk in some way or another. The question is not if you need to take on risk, it is instead — when should you be taking on risk? And, after you take on risk, how soon should you be looking for a guarantee? William Bitters of Omaha, Nebraska, and President of United Financial Information Services (UFIS) explains his guide to financial risk-taking below. This guide is designed to help you make smarter decisions with your money, which will allow you to reach your financial goals as efficiently as possible.
Taking the Financial Risk
“First things first,” William Bitters states. “Before making important financial decisions, ask yourself this.”
1. Am I at a stable point in my life to take financial risks?
“If the answer to this question is yes, then ask yourself the following:”
1. What is my risk tolerance?
2. What is the worst-case scenario?
3. How will my life change and who is impacted if something were to go wrong?
4. Are there potential solutions available?
5. What would have to happen in order for me to recognize the risk is not worth the potential reward?
6. Who can give me further advice before I make my final decision?
“What if the answer to the first question is ‘No’?
The answer is not to do nothing. The answer is to seek out instruments with no down side risk and that preservation of principle.
Although these questions may seem difficult to answer at the moment, they can help you pinpoint what risks you’re willing or not willing to take. “You can’t control all of the risks, but with the help of a financial professional, you can better identify various financial scenarios, so that you’re more prepared if something happens beyond your control,” advises Bitters.
Types of Financial Risks
Once you’ve decided on whether you want to take that financial risk, it’s time to figure out what risk you want to take. You must determine if you want to invest in a public company, a start-up seeking funding, or start your own business. Or, are you interested in putting your money away into a high-risk investment account? These are all questions you’ll need to sort out, first. Your money is valuable, so make sure the decision you make is right for you, and ultimately, the people your decision will affect.
“One thing I advise my clients is that they should make sure they have enough to meet their needs in an emergency, and that both education and retirement savings are secure and accounted for. Then, they can take a piece of their investment portfolio and go for that risk, whether it be investing aggressive growth stocks, or taking out another mortgage,” states Bitters.
With over 34 years of experience in the financial services industry, William Bitters is very adept at working with people at all levels within their financial status. From the Iowa or Nebraska farmer, to the teacher to titans of industry, William is comfortable and understands their needs and concerns. Additionally, some of his clients carry large portfolios or are high-net-worth physicians and small business owners who perform over two million plus in gross sales or labor costs annually.
When Should You Look for a Guarantee?
Financial risk can be measured by several means, and it is important to note that high risk does not always mean high return. For this reason, financial risks can be backed by guarantees. Looking for a financial guarantee could be a smart move, as it can provide an extra layer of security.
What is a financial guarantee?
In general terms, a financial guarantee is a promise to take responsibility for another person’s (or another company’s) financial commitment if that person (or company) cannot meet its obligation. This responsibility (the guarantee) is given to the “guarantor.”
You should look for a guarantee if you wish to mitigate the financial risk you’re taking. What’s important to note; however, is that financial guarantees don’t automatically make your investment risk-free. After all, the guarantor can still default on the liability if the liability becomes too large. That’s why it’s always important to be a responsible and well-informed risk-taker, even when looking for a guarantee.
William Bitter’s Final Thoughts: Preparation is Key
Remember, risk-taking is always a gamble, so make sure to always have a safety net. After all, sometimes even the luckiest risk-takers eventually end up wishing they had better prepared themselves.
Learn more about financial risk-taking, and when it would be the best suitable time to take the risk.