IntroductionWe all need to take risks in life. There is risk in everything. When we take out a scooter and drive on the roads, there is a risk of meeting with an accident. This risk can be minimized if we follow all rules and wear helmet as well. Similarly, there is always a risk involved in train or air travel and so on. However, we do get on with our lives. We need to take calculated risks in whatever we do and the decisions we take. In the following paragraphs, this is discussed in some detail.
What is a calculated risk?A calculated risk is something that is neither too good in terms of results, nor too bad in terms of where it can take us. There will always be some improvement over our previous condition, and it will take us to the next level. Such risks are relevant in savings, in changing jobs, careers, and everything that is unknown today, but can occupy center stage tomorrow.
Calculated risks in saving moneyWhen saving money in ordinary savings accounts, the interest rate is hardly four percent. If we park such money in good non-banking financial companies, on a cumulative basis, we will get up to nine percent, and if our wives do not earn huge taxable income, it is wise to park such money in their names, even if it is taxable. Since section 80C exemptions like their PF contribution can reduce their tax liability, this is recommended. Additionally, a systematic investment plan with just Rs.1000/- per month will be very good. Mutual Fund, operated for ten years can come in handy when we need it for the education of our children. We need to take the advise of financial planners and professionals in this regard. Long term savings instruments such as Public Provident Fund(PPF) is also advisable, as the entire money is not taxed. It should be noted that PPF and long-term Mutual fund investments are tax free.
Yes, there is an element of risk involved in mutual fund investments but it is considered as a calculated risk.
Calculated risks in switching jobsTaking a calculated risk in switching jobs is now becoming imperative, as careers in just one company, or even in one functional specialization is becoming rare. Let us take this real life example. John (name changed) was a Master's Degree Holder in Social Work from the world-famous Loyola College, Chennai. He also had a law degree. The first five years of his career, was spent in fighting with unions, grievance handling, welfare, and even signing one long term assignment, and in-charge of all training activities as well. He wanted to move on. He did a Diploma in Training and Development and became a qualified NLP trainer. He spent three lakhs for this purpose, but got a good job in the Corporate Office of a major cement company. He never regretted his decision, as it came with huge responsibilities but with a sharp HR development focus. His job description had changed for the better.
John had obviously taken a calculated risk. If he had continued in his previous job, he would have been stuck with only industrial relations experience. He took a calculated risk, which paid off. Similarly, we also need to take calculated risks in moving on. One single company careers, for most of us, is history. Moreover we should never ever join a project company, that is a company getting into a totally different product line. In such projects may never take off. We should switch only to well-established, ethical, profit and dividend paying companies.
Challenge of the UnknownThis is a huge and vital aspect of a calculated risk. If there is an emerging field, future of which is unknown, it is still wise to enter it. This is particularly true of entrepreneurship. Organic foods, for example, are a craze in Tamil Nadu and in parts of South India. Some bold entrepreneurs have boldly entered this area and are laughing all the way to the bank. Even traditional food items are available but the focus is on the new area of organic food. This was a seemingly unknown area of expertise some years ago. But not now as success is continuous and made possible because of a huge awareness of the health benefits of traditional organic food made out of cereals.
Similarly if we do have a talent for cooking and are confident of building a good team, this is the best business after resigning our jobs. Such a calculated risk always pays off.
Careers are now built in interior design, professional counseling, art and graphic design, and even in specialized fields like greeting cards. There are professionals involved in teaching at least four foreign languages. These are risks, but worth the gamble. The most important by-product is the flexibility in timings associated with these tasks, where there is a huge amount of entrepreneurship.
Guts- the vital variableWhat is needed is sheer guts. If we have this, we can always succeed in taking calculated risks. Guts are defined as courage without any hindrances. Guts does pay in all situations. Calculated risks are always the result of guts. To develop guts, one has to be positive and look around for opportunities where none exist. These are the opportunities that necessarily involve an element of risk.
ConclusionOnce again, observing success stories of people who have taken calculated risks are always available for guidance, for motivation and for keeping our positive spirits always alive. Let us all learn to take basic calculated risks in order to go far ahead of where we think we can go. So now its the time for acting.