What is a Risk Taker?
Definition: A risk taker in the business world is anyone willing to take calculated risks, so that they can achieve a specific goal. There is always some level of risk involved in everything we do as human beings. Stepping out of your house every day exposes you to quite a number of risks. The same applies to business and investing.
For example, a manager in a business might be a risk taker if he/she makes decisions that may lead to the loss of a portfolio, but then on the flip side, that decision might yield significant profits for the firm.
In the investing world, a risk taker is an investor that prefers investment opportunities that have a higher risk profile, but because those are usually the type of investment opportunities that offer higher rewards.
Characteristics of Risk Takers
Risk takers have some common characteristics regardless of the field where they operate.
- They tend to have a higher tolerance for uncertainty compared to their risk-averse counterparts.
- Risk takers also embrace the fact that their decisions could also lead to losses, but most of all, they remain optimistic in their ability to take advantage of opportunities and gain some profit even if there is a lot of risks involved.
- Wise risk takers always try to make sure that they understand all the variables and have a proper understanding of how systems work. This is aimed at helping them to maneuver through dangerous and risky market conditions.
- Risk takers embrace the risks, but they learn how to manage the risks in their line of business.
- Risk takers are willing to continue trying even if they miss the mark multiple ties. They work towards improving their investment approach until it works in their favor.
The risk taker’s goal is to realize a profit in their investment endeavor even if it is a high-risk investment. They tend to look for investment opportunities in highly volatile market conditions where there is uncertainty because this is the road less traveled.
In other words, they tend to go with the investment option that is characterized by more friction. This is because they have a high appetite for risk, and they know that going against the current might be dangerous, but it is the more adventurous option that might be more rewarding. In this case, the reward is usually higher profits.
Risk Taker vs Risk-averse Investor – What’s the Difference?
Risk takers in the investment landscape tend to seek out investment opportunities in which there is a significant probability of losing money. Meanwhile, traders or investors that are risk-averse tend to pursue low-risk investments. Risk takers are thus more likely to find themselves making big losses due to the high-risk nature of their investment pursuits while risk-averse traders focus on more secure profits.
Risk takers tend to focus on earning substantial amounts of cash over short-term durations. This aligns with the fact that short-term investment options have a higher risk profile. Meanwhile, risk-averse investors tend to venture into long-term investments where low-risk is a common selling point. Long-term investments usually have a lower risk profile, but then the return rate is not as appealing as is the case in riskier investments.
Risk Taker Investments
Risk takers invest in riskier investments such as forex where the price movements are very volatile. It is also the type of market where there are no guarantees of success, but one can come up with strategies that they can use to shift the odds in their favor. However, this market is highly dangerous, and it is easy to lose money.
Risk-averse traders usually focus on low-risk investments such as government bonds and securities where they are guaranteed returns. The goal of the risk-averse trader is to do everything possible to avoid losing wealth and to earn profits over the long-term.