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In The Fight

With investments that take your tolerance for risk into account, your portfolio could prove to be a winner.

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This story appears in the October 1998 issue of Entrepreneur. Subscribe »

What would you like your money to do? Come on, tell the truth--wouldn't you like to earn a very high return in a short period of time, 100 percent guaranteed? For some people, investing is like being in a center-ring fight: They want to score a quick knockout punch. Like the boxer who trains only for the big fight, however, there's a very good chance that without proper coaching, you'll come up short. On the other hand, when Rocky fought hard against all odds, the crowds went wild. After all, the fight doesn't always go to the strong or the race to the quick--sometimes it's the tortoise that beats the hare. For every lucky winner, though, there are hundreds of disheartened souls mourning their hero's trip to the mat. When it comes to investing, the difference between winning and losing is about more than just luck--it includes an investor's willingness to assume risk.

What is risk? Risk is uncertainty, and in uncertainty can be opportunity. Without uncertainty, there's little chance for profit. But without some certainty, all you have is risk, and that's like entering a title bout without your boxing gloves. Although risk means different things to different people, how you deal with it can affect your ability to finance your children's education, buy the house of your dreams or retire comfortably. For most investors, understanding risk is as difficult as beating Mike Tyson would be for someone whose only boxing experience is watching "Raging Bull." Understanding your relationship to risk can help you maximize your returns, minimize your losses and reach your financial goals.

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