Wealth creation is risky business

Everybody wants to make money, but if there is one truth about creating wealth you need to know, it is that you have to be willing to lose money if you want to make money.

You can’t create wealth in a comfort zone, yet that is what a lot of people want to do. They are afraid of the risk that comes with wealth creation, and nowhere is this more evident than in the stock market, as I learnt in my other life when I worked as a stockbroker.

I would often be at the receiving end of clients who got upset at me when a share they had bought went down in value. What they didn’t understand is that your financial advisor can show you the research to help you make decisions.

She can tell you why she thinks a particular share is a good buy, but she cannot control the forces that make the share price fluctuate. The research an advisor gives you (or you even do for yourself) is to the best of his knowledge at that particular point in time.

Neither you nor your broker has control over what is going to happen in the future of that company. That is the risk you take in the process of growing your wealth. It could be shares, property, businesses or any other investment … whatever channel you use, wealth creation comes at a price.

That price is risk. You can either lose money or make money; it is not automatic that investments will yield dividends. And apart from monetary risk (losing money), there are other risks associated with wealth creation.

The first one is responsibility. You are going to have to take the risk of making decisions and being responsible for the outcomes. You can’t blame the stockbroker for losing your money. You made the decision to invest in that particular share.

Whether your decision was informed or uninformed, you need to take responsibility for it. Nobody held a gun to your head and told you to put your money in a particular investment.

Nobody forced you to take that loan or to spend beyond your means. Responsibility is painful because it means that you accept the part you played. At the same time it is very necessary because you finally get your head out of the sand.

Even if you did your best to make a good decision and it did not work out, you get to understand and acknowledge that loss is part of the process. Loss doesn’t mean you don’t try again. That’s back to playing the very popular role of the victim.

FAILURE IS INEVITABLE

To put it bluntly, you are going to risk failure in order to create wealth. The people who have “made it” have failed in some way. Not everything has been smooth-sailing.

Have an honest conversation with them about their journey and you will see that. What matters is how you look at failure. It doesn’t mean that you shouldn’t try again; it means that you now know what to do and what not to do in your next attempt.

You are also going to run the risk of conflict with people as you do something different. How many times do we doubt or stop ourselves because we are afraid of what other people will think? Not everybody is going to be happy about what you want to do. I have a friend who has scaled significant heights in her career. To get where she is she had to make strategic moves that left some people in her life upset.

At the same time she knew who she needed in her corner and made an effort to cultivate those relationships. I learnt a great deal from her example. We need people, but not everybody needs to be in your corner at all times. Let us stop seeking affirmation from the wrong people. Are people who have never done that particular investment or run that business advising you?

Are you hinging your career moves on what your colleagues say? Are you worried about how society will look at you if you leave that high-flying job to start farming?

Are you worried about what your friends will say if you can no longer afford to drive that car, so instead of creating wealth you are doing everything you can to keep driving the car?

You need people because wealth is not also created in isolation, but get the right people you can have sober, honest and respectful discussions with about what you want to do. This could be your spouse, immediate supervisor, business partners, etc.

However, don’t get caught up in trying to please everybody before you make moves.

Lastly, I have come to understand that wealth creation is beyond what shows up in your bank account. Money is good, but that’s not all there is to it. You need to allow for your character to be stretched.

That is what is happening when you learn to deal with failure and conflict, to speak up for yourself and manage money in a disciplined way, etc. The real value is in the process not just the destination.

That’s why people who make money overnight tend to lose it. They don’t have the character to sustain it. On the other hand, whilst those who have engaged in the process lose, they still manage to get back on their feet. Wealth is risky business. Are you bold enough to give it a try?