It is possible to financially benefit from your decision to avoid negative risk. By the same token, you may encounter rewards for taking on positive risk. Knowing when to take on risk, and how much risk to take on, is the nature of risk management. The number one concept of risk management is first and foremost avoiding losses. For a more in-depth discussion see Risk.
WBC Risk Management focuses on fundamentals. We want you to take a supremely confident stance when making all financial decisions.
The principle we want you to have is called the Steady State Principle. This principle in turn centers around something called the Store of Intrinsic Value. Once this principle of safe and steady growth is fully absorbed, you can implement it with Protect, Reserve, Invest.
What we are doing with Protect, Reserve, Invest is taking care of the three things you will be doing with your finances.
Each and every business and family requires a financial principle so that you can rely upon it to make confident, objective, and safe financial decisions. This is what the Steady State Principle provides when properly implemented with Protect, Reserve, Invest.
Opportunity cost is defined as the monetary cost to your future of doing one thing versus choosing to do another, better thing.
Opportunity benefit, on the other hand, occurs when you are presented with a good idea and then realize a gain because of it.
With the Steady State Principle, you can minimize or avoid opportunity costs, these occurring unknowingly and unnecessarily to you. At the same time, you can prepare for economic benefits of opportunities as they arise.
Please explore the three components of Protect, Reserve, Invest. These must work together for your plan to be optimal.
Think about this. It makes sense to finance as long as possible if you can receive a rate on that money greater than what you are paying out to the financing company. How much opportunity are you losing by doing the opposite of paying all of the money at once for a purchase? Put another way, what is the opportunity cost of not having access to all of that money that you just paid for a purchase? It is not only the money you paid for the item, it is what the money could’ve earned for you had you been able to keep it.