Playing The Game of Leverage (8)

Read? Playing The Game of Leverage (7)

When you don't play the Game of Leverages. This is what some people may think of you.  You are risk averse. You are financially less savvy. I heard it. Someone was saying that Createwealth8888 is risk averse. Another one thought that he is financially less savvy and has missed out making more money by not doing leverages. Really arh?

There are two issues here :

1. Risk averse
2. Financially less savvy

Building up your net worth (wealth)

Most of us will build up our net worth (wealth) mainly from earned income and partly from investment portfolio. Our earned income may come from job employment, self-employment or doing businesses; and capital injected into our investment portfolio come from saving more and spending less. However, there will be some lucky fellows who have rich parents contributing significantly to their net worth and/or by injecting huge capital into their investment portfolio.

Risk Averse

By not doing leverages, Createwealth8888 is deemed to be a person who is risk averse. When I heard it, I really want to laugh at these people. Such a shallow thinking! The only peoples who are risk averse that I know are those who park most of their money into bank fixed deposits and/or money market fund.

Speculating in the stock market is bloody risky business. Anyone who has some commonsense on stock market will know it. In another word, anyone who speculates in the stock market is either ignorance or not risk averse.

Do you still think that Createwealth8888 is risk averse? Please, don't let me laugh at you when I hear you say that again.

Financially Savvy

Since most of us are either working at our jobs or doing businesses to build up our net worth by earned income and partly by increasing the size of our investment portfolio through investment gains. Several things can happen here.

1. If you become rich from your jobs; you have an excellent and outstanding career. You are among the top income earners in Singapore.
2. If you become rich from businesses; you are an excellent and outstanding businessman in your industry.
3. When you become rich from your investment portfolio; you are super investor or financially super savvy.

Is someone financially savvy or not?

It should be judged by the performance of his or her investment portfolio. It doesn't necessary mean that people do leverages are financially savvy. People who don't are less savvy. You shouldn't have such shallow thinking.

How do we measure and benchmark financially savvy?

Since most of us are doing our best to build up our net worth; may be one way is to measure the investment gains in the investment portfolio and benchmark it against his or her net worth.

For example, when the percentage of investment gains in the net worth (wealth) is more than X% ; we will assign it with the following score in a 10-point scoring system:

> 90% : 10
> 80% : 9
> 70% : 8
> 60% : 7
> 50% : 6
> 40% : 5
> 30% : 4
> 20% : 3
> 10% : 2
> 0% : 1

Unless you score more than 5 points, don't ever think that you are more financially savvy than Createwealth8888 who doesn't play the Game of Leverages.

With a score of just 5, I am an average investor so nothing to shout about.