As risk managers, we have to manage risk both on and off the screens.
The same way we cut losers quickly and never let them spiral out of control, we need to protect our relationships, health, safety, and the well-being of the people we care about from the risks that can do the most real damage.
Risk on the screens and risk off the screens can feed each other if left unchecked.
If youโre serious about managing risk in the markets, you have to allocate real attention to risk management in every other area of life that matters.
You may be hyper-focused on protecting your account, avoiding drawdowns, and dodging negative tail events in the market. But if your attention to risk isnโt balanced, you may unknowingly increase the odds of a black swan somewhere else in your life, whether thatโs your health, relationships, family, or mental state.
At times, I catch myself managing portfolio risk with more discipline than I manage risk in the rest of my life, and my wifeโs usually the one to remind me.
Think of her as my automatic IRL <0.1% stop loss.
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Once youโve gained financial freedom relative to your needs through the markets, or whatever else youโre doing, the next level may not be finding more edge in that thing.
It may be taking a breather and making sure everything else that matters is healthy.
It may not be waiting until the end to enjoy the fruits of your labor. Maybe the healthiest approach is learning to enjoy them, in moderation, all the way up.
Itโs okay to treat yourself along the way. And if thatโs not really your thing, itโs okay to treat the people you love too.
Maybe that is part of developing edge around the rest of your life, so when the time comes, you can actually enjoy the fruits of your labor with the people you love for a long time.
Or maybe the reason you havenโt reached financial freedom yet is because poor risk management everywhere else in your life keeps bleeding into the one area where youโre trying to build it.
A person who only manages risk in their career may eventually find themselves with everything they thought they wanted, but no one left to share it with, or unable to fully enjoy it because they neglected themselves along the way.
Just like we build balanced portfolios to protect ourselves from single-company, sector, or theme-specific tail risk, a more global, whole-life approach to risk should take priority.
Thereโs no point protecting the account if you blow up everything else around it, and it's most certainly impossible to see the forest when you're headbutting a tree.
-๐ฝthoughts