This article originally published in The Northern Daily Leader on 29 September 2012.
It’s a commonly held view that being successful means taking risks. This view forms the origination of the well-known saying ‘nothing ventured, nothing gained’. The implication is that you simply can’t win or be an achiever without taking some risks. The self-help business books which have become popular in recent years all repeat this mantra. I recently spotted a book in this category with the inspiring title “Smart Women Take Risks: Six Steps for Conquering Your Fears and Making the Leap to Success”. According to the publishers blurb, the book would help women actualise their potential, increase their self-esteem and reach their goals. The message is that you just need to take some risks and you will succeed, whether it’s in sport, business or even in relationships.
While it’s certainly true that most actions involve taking on some form of risk, it doesn’t necessarily follow that the greater the risk the greater the reward. Investors who have lost money on the countless number of failed ideas and schemes over the years are proof of that. For a perfect example of the fact that you can be successful without taking excessive risks, you need look no further than Sir Donald Bradman. We’re all familiar with the Don’s exploits – the greatest cricketer in the history of cricket, averaging 99 runs per innings, nearly more than double his nearest rival. What is surprising about the Don’s remarkable test cricket record, is that in twenty years of test matches, he hit only 6 sixes. So despite making nearly 7,000 runs in his test cricket career, he only pulled out the big swing on six occasions. That statistic tells a remarkable story of how Bradman was able to play relatively conservative cricket, limiting his risk of being caught out hitting for the boundary, yet still be the greatest cricketer of all time.
The parallels with Bradman’s approach to batting and investing are quite clear. As with cricket, investors need not take on excessive amounts of risk in order to achieve their financial goals or to be successful investors. A prudent approach to managing your money can yield even better results than chasing the latest fad, or jumping in and out of hot stocks, hoping to double or triple your money overnight. You don’t having to be hitting sixes to increase your wealth; a measured and cautious approach can get you there just the same, but with less possibility of being caught out. Remember the Don the next time you’re considering a risky investment. A stockbroker once himself, I’m sure he’ll help you make the right decision.