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Never Lose Again: This Investor Tactic Will Make You A Better Risk-Taker For Life

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Fellow Riskologist,

When you commit yourself to something—a project, relationship, a new job, etc.—how do you protect yourself if everything goes wrong? You want to invest yourself, but you don’t always want to bet the farm right off the bat.

Last year, I did a dating experiment where I went on about 40 dates with nearly 20 different women. Right away, I needed a way to filter. I wanted to know that, even though I was going on lots of dates with lots of different people, I wouldn’t end up spending too much time with someone who was a bad match for me.

So, I devised a little system to help me. I created a set of criteria—a list of characteristics or behaviors—that I would look for in each woman I met that would tell me if I was on the right track. Some of them were positive:

  • Is ambitious
  • Loves her work
  • Has a good attitude
  • Is easy to talk to

And some were negative:

  • Recently got out of a relationship
  • Is too materialistic
  • Doesn’t have any opinions
  • Hates her job

After a few dates, if the signals were looking good, I’d keep going. But if not, it was time to move on.

Setting up criteria was important because it’s easy to end up in unhealthy relationships—romantic or otherwise—if you have no standards for the people you surround yourself with. And since it’s impossible to avoid being influenced by the people around you, it’s really important to pick good people!

Essentially, what I’d done is create a stop-loss. This is a simple but very important instrument in the financial industry. When you buy a stock or other investment, you can implement a stop-loss which is just an automation rule that says, “if the stock falls below $X, sell it.”

What a stop-loss does is allow you to invest in something risky, but limit your losses. So, you can go after big but uncertain gains without fearing that, if it doesn’t go your way, you’ll lose everything and have to start over.

You can see from my dating example you don’t have to be a day-trader to get the huge benefits of the stop-loss. There are lots of ways to smartly implement them in your everyday life. Here are just a few examples.

Putting A Stop-Loss On Your Career

If making advancements in your career is important to you, create a stop-loss at work.

Look at the goals you have for your career and where you want to be in the next few years. From there, you can set a list of criteria and a timeframe for when it should be achieved.

If you’ve waited for a raise, set a date: If you haven’t increased your income by X% in 6 months, you can implement a stop-loss by scheduling a meeting with your boss to discuss your compensation.

Or maybe you really want to work on a certain type of project, but haven’t been assigned to it yet. You can enact a stop-loss by scheduling a meeting to talk career advancement with your boss if nothing has changed after X months.

Whatever your ambition is, a stop-loss puts you back in charge of your work by making you the one who decides when it’s time to talk career advancement.

And if your stop-losses come and go without decisive action, you can implement another stop-loss by starting to look for another job with better prospects.

The Stop-Loss For Travel And Adventure

I like to travel a lot and, when I do, I sometimes put pretty ambitious schedules together. I might try to go to five different countries and do three or four things while I’m there.

If you’re an ambitious traveler, you know these kinds of itineraries can be delicate, and a little change in one place can throw the whole trip into jeopardy.

One stop-loss I like to uses in these cases is the flight change fee.

Most airline tickets are non-refundable, so you can’t just cancel your whole trip and get your money back, but what you can do is pay a small fee to change your ticket.

This allows you to keep your schedule a little flexible to accommodate unavoidable changes elsewhere like a tour you know is going to be delayed or a last-minute denied visa.

Depending on your airline, you can often change your flight dates/times or even your scheduled itinerary for around $75-100.

It’s no fun to pay extra, but $100 is a bargain when thousands more for a big trip are on the line.

Putting a Stop-Loss on Business Projects

If you’re the entrepreneurial type, stop-losses can save you from complete failure and bankruptcy.

Before I start any major project, I always create a maximum budget I’ll spend to carry it out. This forces me to work hard with the resources I have and get creative if I run out of money. If I hit my budget and realize I’ll never succeed without spending a lot more, it gives me an opportunity to implement my stop-loss and make a smart decision about whether I should keep going or not.

Of course, sometimes you have to bet the farm to do something big.

You can also create a stop-loss if you’re working on a business project where expenses are shared with one or multiple partners by setting a maximum each person can spend without consulting the other.

This way, no one person can put you on the line for big expenses you wouldn’t want to take on.

Setting Your Stop-Loss The Smart Way

You’ll be far ahead of the pack just by implementing a stop-loss in your life at all, but where you set it is important.

To smartly set a stop-loss on your life, you have to consider your own risk-tolerance. You should set it at a level where you can stomach the loss if you have to rely it.

If you set your stop-loss too low, there’s almost no point in having it.

For instance, if you allowed yourself to lose 90% of an investment before getting out, the stop-loss probably won’t help you because losing 90% is basically the same as losing everything and starting over.

But you also don’t want to set it too high, especially if what you’re investing yourself in is important and challenging because things like this always come with set-backs. You don’t want the stop-loss to stop you before you’re actually ready to.

If you can see a great opportunity to advance at work, but you decide you have to double your income in a month or else you’re quitting, you’ll never reach that opportunity.

So, as you set up stop-losses in different areas of your life, remember to set them realistically and based on what you can actually afford to lose so that they save you when you need to be saved, but don’t cut you off before you’re ready.

Your Homework Today

So, you’ve seen just a few examples now of how you can take the simple concept of a stop-loss and apply it to many parts of your life.

When you do this, you open yourself up to the opportunity to take on bigger aspirations because you’ve developed a kind of safety net for when things go wrong.

In the comments, let me know how you can start implementing stop-losses in your own life.

Yours in risk-taking,
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Founder, Riskology.co

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What smart people are saying about this...

  1. Martin says:

    I do this all of the time with new goals. For example, I recently started pro wrestling training (don’t laugh). I’m giving myself a year to see if I can learn enough to do a match in front of a crowd.

    Does commitment matter? It’s fairly low commitment with 2 classes a week at 3 hours total.

  2. Martin says:

    @Tyler Commitment is key. I’m doing my best not to miss classes. My Argentina trip will get in the way though.

    @Tom Any ideas for a character? I’ve been told that I can be a “surfer douche” with my new long hair lol.

Founded with love by Tyler Tervooren

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