Lessons from the Game of Risk

The game of Risk was one of my favorites as a kid.

It taught me some of my most important rules about successful risk-taking.

I was pretty good at the game.

Battle strategies I used routinely to conquer the world seem to translate into modern financial management.

The first, overarching concept, and they teach this at West Point, is to concentrate your forces and attack with overwhelming numbers whenever possible. This tactic applies throughout the game, but is especially important at the beginning.

No one ever beat me at Risk by spreading out their armies.

To accomplish any goal in life, especially financial goals, there needs to be some concentrated effort to get started, moving in the right direction. It could be easy, like signing up for a 401k plan, or more challenging, like paying off a pile of credit card debts. Watch for our upcoming videos on these and other “get moving” ideas.
Once the game starts, you have to develop a secure source of constant reinforcements, by controlling countries and continents at the beginning of your turn and by collecting a card at the end of a turn.

In the real world, reinforcements translates into income.

You need to use some income earned today to help secure your income for tomorrow.

Have a strategy for deploying your armies, and the attack plan.

Likewise, when you spend your money, do it in ways that makes sense.

Be very cautious about living beyond your means for anything but the most temporary of situations.

At the end of each turn in the game, you need to be prepared for your opponents’ attacks.

In your financial life, you need to plan for the obvious risks that occur in all but the most sheltered lives.

Various forms of insurance allow you to cost effectively transfer catastrophic risks to the insurance company.

Diversification is a tool used to spread investment risk across a variety of different types of asset classes, and is a “defensible” strategy, even though it doesn’t ensure a profit or protect against a loss.

Will Rogers said: “even if you’re on the right track, you’ll get run over if you just sit there.”

In Risk, You need to conquer at least one country every turn to collect a “reinforcements” card. If you wipe out another player, you also get any of their accumulated cards. The value of these cards escalates every time a player redeems them for more armies.

Just as the scale of the battles escalates in the game, in life, things get more expensive. It is important to keep growing your income. Today, people are paying as much for pickup trucks as Beth & I paid for our first house. Heck, they’re paying as much for high‐end bicycles as my dad paid for his house in 1955!

Building a portfolio of investments that strives to outpace inflation while mitigating risk is an important component of financial planning.

Contact us to learn more about how we build financial plans that help you pursue your goals with appropriate levels of Risk!

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