Worth The Risk

A lake in the desert.

The next time you are driving back from Las Vegas think about this class.  NO NO NO it's not the instructor telling  you  why you  should have saved all that money.   You gotta have some Fun! I want you to think about Risk and Rewards.  When you get to the agricultural station about 20 miles east of Barstow look ahead and to your left .  You'll see a lake with  houses around it.   That's Calico Lakes.  And it was my chance to be a millionaire before 35.

The Lake Story

I had  a chance to be a limited partner ( this means only the money I invested was at  risk ) in this opportunity with some savvy business people I knew to build  the lake and homes and  sell them.  I knew it was an all or nothing proposition  and my  best guess was that its chance of success was 50/50.   Well it ended up on the wrong side of the 50/50.  I  lost  half of what I  invested.  Why only half?  The losses  incurred had a big  tax benefit  so the Tax Man covered Half .  Still I lost money and although disappointed it was not a disaster.

1. The  money I invested was my Bonus Money for two years.  I was living on my paycheck so I felt i could risk it.
2. I  was single, already had a  townhouse  and was saving into my 401k .
3. No debt outside of the house and a car payment. 
4. At a younger age I could afford to take a big risk .  The payoff possibility was a minimum of 30 times my investment in 5 to 7 years.   
5. Would I do it again ? yes!  In my youth and not married yes.  Today? no! I don't have the earning years ahead.  now is the time to be  prudent.

 The Snapple Story

Snapple

 Calico Lakes was only one of 3 "risky investments" I made in my youth.  The 2nd was an investment
in  what was similar  to what   today you would call a venture capital firm.   Well fortunately for me this one did somewhat better .   One of the investments was in SNAPPLE and the fund did well because they sold that investment to Quaker Oats at a huge profit  Now i only owned a tiny tiny bit.  But the profit from this  one was enough that it covered the loss from Calico Lakes and  actually adding the two together resulted in a reasonable though not excessive by any means profit. 

The Alza  Story

ALZA PATCH ON ARM

You may have used a patch to avoid becoming seasick.  Well the company that developed this process  Alza, had  the technology but not all the  money it needed to fund drug research for other drugs using the patch  delivery technology.   Anther risky small investment. Well one a loss, one a decent return, but this one was a home run.  One of the drugs came to market and the company exercised its buyout rights to buy back our investment.  Well at 5 and 1/2 times our investment plus we had received some income before  not bad .

That was the end of risky investments!

Financial Balancing

Why times changed. Personal life changed.  A larger home and   establishing a college fund became a priority.  The downside of a potential loss was much greater.

Why tell you this story? Because  there is no right or wrong with investments.  It's all about having a
long term horizon and  making decisions with consequences you can live with. Three risky investments and overall  a quite decent return.   Was I smart or lucky.    Probably somewhere in between.  But  it was worth taking the chances  All I needed was one.