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FP Article 15.10 (To sign up for a FREE 16-lesson eCourse on Investment Risk, please click here.)

Investment Risk - Lost Opportunity Risk

by Rajen Devadason

The great secret of success in life is for a man to be ready when his opportunity comes.

Benjamin Disraeli

  Lost opportunity risk boils down to us not being able to do B, let's say, because we've over-committed our resources to doing A.

For example, each time we are paid our salary, we are faced with the option of either spending or saving that money.

If we choose consumption, then that money is lost forever and cannot be saved or invested.

Let me be more specific:








If we decide the bulk of any month's salary should be spent to buy some pretty gadget or gizmo, well then as far as we're concerned, that money's been used up! Whereas, if we choose to invest it wisely, then over time that money is likely to grow; eventually it will grant us many more opportunities, later on, to spend so very much more!

This is an article explaining lost opportunity risk. I hope you enjoy reading it. But if it isn't what you're looking for, you're welcome to search for something that better meets your needs. Thank you for allowing me to serve you.

Rajen Devadason

Web www.FreeCoolArticles.com










You should, however, bear one thing in mind: Even when it comes to the acts of saving and investing, there is a possibility of a more subtle form of lost opportunity risk.

For instance, if you were to invest in a condominium at the top of the property cycle - meaning you end up paying way too much for it - you might then find it very difficult to rent it out for a ‘decent’ sum.

If that were to happen, you would have sunk a significant portion of your precious net worth or expended a large proportion of your capacity to borrow into real estate that earns a meagre return. That's depressing enough. Sadly, it isn't the worst of it!

You might subsequently find you no longer possess sizeable cash reserves to take quick advantage of a great stock purchase opportunity that might present itself to you.

It might be a wonderful company that is very suddenly – and only momentarily – selling at bargain basement prices because of a short-term market correction or specific episode of mispricing.

In such circumstances, it is easy to understand how an opportunity has been lost. This form of investment risk is always present each time we're faced with any spending or investing opportunity!

The only way to fully avoid lost opportunity risk is to nurture a high savings rate into very liquid instruments and to never commit too much of your liquid store of cash to any single investment.

Here's the one lesson you should walk away with from this article:

Always aim to invest as wisely as you know how and never commit all your cash reserves to any one venture.

If you'd like to continue to learn more about other types of investment risk, here's additional information for you...

15 Types of Investment Risk (OR, to sign up for a FREE 16-lesson eCourse on Investment Risk, please click here.)

1. Borrowing Risk

2. Company Risk

3. Credit Risk

4. Currency Risk

5. Diversification Risk

6. Industry Risk

7. Inflation Risk

8. Interest Rate Risk

9. Liquidity Risk

10. Lost Opportunity Risk

11. Manager's Risk

12. Market Risk

13. Market Timing Risk

14. Political Risk

15. Prepayment Risk



© Rajen Devadason

Web www.FreeCoolArticles.com






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Rajen Devadason, CEO RD WealthCreation Sdn Bhd & RD Book Projects
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