Susan L. Farrell, Author

Risk/Reward Ratio

dreamstime_xs_48767082Risk/reward ratio is used in the investment and financial worlds.  I think we can use the basic concept in our everyday lives.

Every choice we have comes with potential risks and potential rewards.

A method that can help us make better decisions is to identify the potential risks and potential rewards for a decision we need to make.  Are the potential rewards worth taking the associated risks?

For those of you that jump into things too soon, this can help you evaluate what this action might cost you.  You might want to reconsider making a particular decision or develop a less risky plan.

For those of you that are usually hesitant to do something new, this can help you see that the risks (costs) may not be as high as you initially thought.  You might decide to just do it.

Generally, but not always, if the potential rewards are high, the potential risks are also high.  If the potential rewards are low (small), generally the potential risks are also low.  If we want to gain more, we usually need to risk more.

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