Understanding Risk thru Adventure Learning - Lazy Investing Way

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Tuesday, November 21, 2017

Understanding Risk thru Adventure Learning


Last week, I joined a Media Synergy activity through Ramon Aboitiz Foundation’s Kool Adventure Camp. There I Un-learned, learned and re-learned a lot of things about myself as well. This includes risk and adventure learning.

The things we learned did not come easy. We got to know each other – even deep dived into our biggest fears and insecurities, crossed a hanging rope/cord that wobbled while suspended 30 feet(?) above ground, or fall into empty air as we failed to cross a challenge. The Team including our facilitator take “stretch targets” very seriously.

Learning can come in all shapes and sizes, but I think the most powerful form of learning is through experience. Under experiential learning is adventure education, which is the promotion of learning through adventure centered experiences: Outdoor exploration, challenge courses, and even indoor activities.

Risk management on the other hand is a strategic approach to planning which aims to focus attention and action where it is most needed (things likely to go wrong, its consequences, & minimizing it).

Adventure learning helps people to develop the ability to cope with and experience a wide variety of challenges. Exposure to risks and teaching them to manage risks and take sensible decisions makes them safer.

As a financial education advocate, we all know what ‘risk’ means in terms of money management, but here, I was literally confronted by it –face-to-face.

This made me recall the “secret of sound investment” that Benjamin Graham (Mentor of Warren Buffet) revealed – “Margin of Safety”. SAFETY in the Kool Camp is the top most priority. They provide a safe environment to not only surpass our limits (Physically, mentally or even emotionally), but also to fail, learn fast and build resilience.

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return.” – Investment Definition by Benjamin Graham and David Dodd

Managing Financial Risk

Here’s a reality check about risk: All investments carry some degree of risk. By better understanding the nature of risk, and taking steps to manage it, you put yourself in a better position to meet your financial goals; just as we learned to develop awareness and skills to use the ropes course equipment, we also needed to execute it flawlessly as our colleagues’ life was literally in our hands.

“Rule #1: Don’t lose money. Rule #2: Never forget rule #1.” – Warren Buffet

Diversified Asset Allocation – Basically, don’t put all your investment-eggs in one basket. By including different asset-classes in your portfolio (e.g. stocks, bonds, real estate, cash), you increase the probability of satisfactory returns (while others are flat or negative). This can be achieved via an Index Fund (UITF, MF, ETF).

Hedging (buying securities to offset potential losses on another investment) and Insurance – can provide additional ways to manage risk. Both strategies typically add cost, which reduces potential returns, but it’s a small price to pay for safety.

A VUL (Variable Life Insurance with an Investment component) can be an example of this depending on one’s goals/perspective.

Risks comes from not knowing what you’re doing. The Adventure learning experience made me relearn to listen through the fear; At some point, we were scared & got caught up in what if’s, complaining and being fearful that we weren’t listening to the very instructions for the safety of our lives.

You cannot just “intend” your way towards your (financial) goals, you need to implement and DO.
Not Investing is riskier these days!!

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Originally Published in Philstar - The Freeman Newspaper last November 21, 2017.

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