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  • Stickies & Evergreen

    Is "Risk" a four letter word in property?

    Interesting analysis on this topic from Propertini:

    Investors are interested in two things – the rate of return, and the risk taken to get this return.

    Propertini have gone beyond the traditional Sharpe Ratio, adopted as the key benchmark for asset managers, and applied a complete risk-return analysis across the primary asset classes.

    This research is far more sophisticated than the Sharpe Ratio and yet far simpler to describe. It all comes down to one very elegant number which has been called the Omega Ratio.

    The research shows:

    >A risk-return ranking across the primary asset classes for different investor types.

    >For risk-averse investors, residential property gives the best returns.

    >Investors who can take more risk can do better with gold or equities – but could see a greater downside.

    Co-author of the original mathematical derivation and publication of the Omega Ratio, Con Keating, says of the work that "It is really very stimulating to see Omega functions brought to bear, as measures of investment efficiency, on the real estate sector.”

    Vice President at Propertini, Aled Davies, explains “It was vital to conduct rigorous research to bring clarity and a clearer perspective on the risk-rewards relationship of residential property investing. The best way of doing this is to provide a risk-return ranking for different return targets representing different investor types. We believe this can provide insight and understanding to investors in all asset classes and we hope others build on this work.

    Infographic Omega Risk Return Measure
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    Great comment by Cormac Henderson on a FB Group:

    Cormac Henderson Risk is my friend because without it I wouldn't have a business. Risk is what I take on my shoulders each and every day. Risk is what separates Entrepreneurs from mere mortals. Risk can be mitigated, controlled and managed if you learn this you will always be wealthy!
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    When there is a question: to risk or not to risk, I always tell myself: if there is no risk, there is no profit. The risk can be painful step, but if there is no pain, there is no gain too. All the best in this world came from risk takers, so cheers all of you risk takers Smile However, in the world of real estate's the risk is intended for the younger warriors.
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    Life is a Risk

    But I am glad I took the risk to leave a 40hr week and have freedom and live my life on my own terms

    They are the biggest reward to me


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    Learn Change and Adapt ?????

    History is written by the winners...

    people need to bear that in mind.  Its rare to read books about people who took big gambles and lost it all. The "losers" dont post on forums generally (unless they  have reversed their fortune and then tell us how it was a great experience and taught them a lot..).  The guys who lost it all, tried again and lost it agian - you dont hear from them.

    You dont hear "I quit my job, lost it all and am now on benefits....but I am glad to have tried"

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    https://www.Rentcent.co.uk

    A blog and information source for buy to let landlords

    The teacher was giving a pep talk to my son's class when they were 16 and about to 'graduate' from school after GCSEs - saying to go forward with respect for those less able, as so many are, seeing as you know just about everything by now... He laughed at his own comment to indicate a chuckle was appropriate here.  My son said he dutifully laughed along with the rest of the class although he didn't really get the joke, as it was surely true?!  The class were at the top of the school and had completed GCSEs, plus he was always top of the class, so job done... No?!

    Every year I notice that I'm a bit stupider than I thought I was. (I could be losing my marbles, but I prefer to think it's due to the ever greater accumulation of wisdom!)

    I think it's quite fortunate when it comes to risk, that it lends itself well to youthful naivety, as you have time to recover from your mistakes when you're young.

    If you do start to win more than you lose and forge ahead on the road to success, then you are likely to become naturally more cautious over time for a number of reasons, not least having more and more to lose.

    One of the things I've always found helpful with risk though is not being too bothered by the idea of poverty, should it all go horribly wrong.  Dave and I enjoy watching programmes such as Benefits Britain: Life on the Dole but often complain when we do that "Most people just have no idea how to be poor, do they?!"  Honestly, it's almost a shame we're not poor as we'd be bl00dy good at it!!  We regularly practice being poor (at least when it's not too inconvenient) just in case:-)

    Angela

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    "It is the small decisions you and I make every day which shape our destinies." Anthony Robbins