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Age and risk management

[Disclaimer: I’m neither a parent nor speaking on behalf of all parents]

I was walking on the pedestrian bridge to Pacific Place in Hong Kong, watching people from various walks of life - young and old - pass when this thought came to mind:


They say that those who have kids tend to look and behave older than they really are. It’s not just the result of long term fatigue and physical exertion, but also the experience and wisdom that comes with it - Knowing what to avoid, where to step, how fast to go, what not to eat.


Older people, like parents, likewise share an inherent trait of being highly averse to risks, especially overly-high risks.

 

Risk management is a very underrated attribute.


It is boring, dull and invisible. Its virtues are often only realised in times of ruin or in hindsight as we grow older.


Contrary to what we conveniently assume, wealth has little correlation with a person's line of work but more about just being around at the right place and the right time.


I have seen high-flying bankers who used to hold lofty pay-checks, being being so-called "reduced" to the common man. And it's not only bankers, celebrities share a similar fate as well. People such as Michael Jackson, Mike Tyson and Nicholas Cage went into financial debt splurging on extravagant items. Hard to imagine sometimes.


Being in a highly-desired job and earning a five-digit monthly pay-check upon graduation doesn't guarantee that you'll be financially well off in your 30s and 40s.


And even if you find yourself in a financially advantageous position in your 40s, circumstances can change quickly overnight if you make a misstep. I find those swaggering in this category while exuding an air of arrogance incredibly vulnerable and borderline repulsive.


So risk management isn't sometimes about portfolio growth and diversification, but more about avoiding bad decisions with drastic outcomes. Knowing when not to act when everyone else is getting excited about hopping on the bandwagon, learning how to avoid FOMO, and also when to move when everyone else is cowering.


Those who are ruin-averse tend to be more humble and better at doing this. Experience is oftentimes good teacher.


Steve Schwarzman of Blackstone once said in an interview with Bloomberg.

There are no brave old people in finance. Because if you’re brave, you mostly get destroyed in your 30s and 40s. If you make it to your 50s and 60s and you’re still prospering, you have a very good sense of how to avoid problems and when to be conservative or aggressive with your investments.

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