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Mark Sekree Posted:
4 years, 140 days ago (May 10th 2013)

Adventure ISA, Financial Advice

Risk, Reward and Expectations- Lessons from the Fast Lane

Motorbike speed   Damaged bike

Yesterday I realised a life-long ambition to ride a motorbike on a track, and went straight to the top on the wonderful Brands Hatch Grand Prix circuit near London. In a blatant attempt to get some pretty motorbike pictures on the EZ ISA page I thought I’d write a post about it- but what angle? Of course being biking it has to be risk, but also reward and how expectations are crucial to both.

I had an amazing day, I have never experienced speed, power and control anything like it- that feeling of accelerating hard out of a corner, rising to Ferrari speeds with the engine screaming and nothing but some leather and a visor between me and the world was nothing short of magical. Definite reward then.

But the truth is I stacked it just before lunch. I shot a look at my speedo on the straight (stupid error), missed my braking point and couldn’t quite make it round the corner before running onto the gravel trap. Although my bike got patched up enough to go out in the afternoon and get home I’m sat here now with a sprained ankle, bruised rib and a several hundred pound repair bill to look forward to. It was a risk.

The point here though is about expectations. Am I pissed off? No, not really. I was fully aware of the risks when I signed up and I can’t really complain when they’ve come to pass. Did I think I was likely to be better off from taking that risk- absolutely. Am I better off now? Just about! Am I going to be better off in the future? I hope so, but I’m not sure- that’s the risk.

It’s very much like investing. If I choose a high risk investment I do it because I think I’m going to be better off overall. I expect there to be some short term pain and losses sometimes but won’t complain when there are because I’m expecting them, and hoping that taking that risk will bring me much greater wealth overall, even if I’m not certain about it.

I would be upset though if I had been taking a stroll in the country and picked up those injuries- the reward wouldn’t have been there, and neither would the expectation. That’s why it’s much worse when a low risk investment loses money, and we look to avoid that.

It’s also crucial to understand and control your risks when you take them. I protected myself with good quality gear and have only ridden anything like that on a track where there were only other riders around, run-off areas, medics and support crew and I was riding a bike that I could afford to damage. SEI, our investment guys, are experts at controlling risk while trying to get the greatest rewards on your behalf.

My last thought from all this is the risk of not taking any risk at all. This is the equivalent of staying in and watching TV, or ‘investing’ solely in cash, rather than going and doing something, anything. You’re never going to have anything particularly bad happen to you watching TV, and it will probably be passably pleasant, but doing that and nothing else is, to me, a certain fate much worse than most balanced risks you can take.

 

Mark Sekree Posted:
4 years, 143 days ago (May 7th 2013)

I become a Wise Monkey

Check out my appearance as an investment ‘Wise Monkey’ on this webcast.

Each of the SEI funds invest partly in property, but mostly commercial buildings. The investment I mention accessing student property is brand new but should soon be available through EZ ISA.

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