Life is Risky, Live It Anyway (by Brad Hart)

Mindset on seeing your life as taking many bets with risks & rewards

Brad Hart presenting on “Risk-Taking Mindset”

Summary

Brad Hart is a day trader. The key message of his presentation is “See every moment of your life as an opportunity to make small bets, you need to take calculated risks in order to have certain rewards. If you fail, learn from your mistake and move forward. Eventually, you will get comfortable making bigger bets and have better rewards. Remember, inaction is usually the biggest risk.”

Below are the 12-page notes on his presentation slides on the Risk-taking Mindset.

1. Fear is your friend

• Fear shows you what needs to be explored. If you are afraid of something, you probably don’t know it well enough. You should get to know it better to make it an asset, not a foe in your life.
• Expanding your comfort zone, making better decisions and taking better risks, and getting good at making bets.
• Taking calculated risks expecting to fail often and learn… pay tuition, networking, etc. Take a small amount of money and time, and bet on something. The more bets you make, the high expectancy you will have in the future to make a solid bet for the return. You are not afraid to take action. Make a decision, it doesn’t have to be perfect. Eventually, you’ll get good decisions coming.
• Seeking out mentors to help you understand the problems you face.
• Replacing fear with confidence through repetition. Define the worst-case scenario and accept it.
• Brokers are broker than you for a reason.
• Gather info, and make a decision. Ask advice. Consider no more than 3 alternatives.

2. Resources and values

• Time is the only non-renewable resource. It could be a thousand years, but your life will end. Time should be protected and not risked lightly.
• Take care of yourself to increase the odds that you will have a lot of time and enjoy the time you have. Attractiveness counts in success. Be at your top physical condition. What’s holding you back? Your physical and mental performance. What’s limiting you to reach your next level? Be honest with yourself.
• More money can always be made.

3. Removing emotion from decisions

• Money is only money. It is a made-up concept that people give value to. Only you can change your relationship with money. Adopting a poor persons’ ideas about money will keep you poor. Rich persons’ ideas make you rich. Get good at making decisions not based on what they lose, but they would gain. It gets easier once you work the muscle over time.
• Connection capital, time, health, supplies, and other resources are more important than money.
• Know your risk tolerance. Understand what you’re capable to lose. You need to constantly expand your comfort zone. You can be more risk-tolerant and make bigger bets. General rule: The younger you are, the riskier you can afford to be.
• Know what your time is worth and protect it. Paychecks vs. Asset holders.

4. Risk

• Risk is the possibility of loss
• You can control risk by determining what your edge is vs the odds of a positive expectancy
• Edge/odds = how much of your money to bet
• Training your gut, improving psychology
• Define the risk, assign a probability, make a bet
• Define how much of a resource you are willing to lose, and what your stop-loss is. Stick to it.
• Over time, good bet outweigh the bad.
• “I think it’s a 60% chance I can win, and a 40% chance I will lose. I decided I’m willing to risk $X in time and money to see if I’ll win, and I’ll learn something regardless.” You make that small bet, you learn something and you move on to the next small bet, and when you get comfortable, you can make bigger bets.
• Mark Cuban takes a lot of calculated risks. If you make 1 good bet, it could pay off big.

5. Trader Mindset

• Be very careful about your risk, your psychology, and what factors you can control, and can’t control.
• Any idiot can put on more risk. We’re playing the long game. Self-control is key to risk management.
• Endless opportunities in the marketplace. Do not chase.
• No good information or bad information, no right or wrong, just information, just trades. Be careful about the emotions you attached to it, because it affects your decision-making.
• Trading is not investing, vice versa
• Be rigid in your rules, and flexible in your expectations.

6. Risk and Life

• Learning to manage risk is essential to life.
• Everything you do involves risk. Be intelligent about your risk and not be fearful.
• Don’t be afraid to trust your gut and walk away. There are always more opportunities.
• Know the risks and accept them.

7. Investing

• Entrepreneurs move resources from areas of low yields to high yields.
• Invest in yourself, and play to your strengths.
• Make money work for you, instead of another way around.
• Cash until the opportunity arise.
• Good leverage and good debt.
• Move money from areas of high-risk structure (time for money, job, earned income, working for somebody else and not controlling your destiny, doing things that don’t worth your time) to areas of low risk (cash flow assets, passive income).
• Don’t fool yourself, be honest.
• Your money is worth less every single day, the Fed is printing money every single day.

8. Investment

• Buy when the selling stops, let the winners run, and cut your losers. Sell when the buying stops.
• An investment must pay you to mitigate time risk and exposure and increase passive income. Otherwise, it’s a trade. Dividends stocks, real estates rent, etc. Don’t confuse an asset with liability (liability takes money out of your pocket every month: boat, car, house)
• Appreciation is not guaranteed. It’s a bonus. If you want to take a long-term position in something, and you have an undefined risk and time and exposure. You will get paid to take this time risk. You have to wait for the opportunity at a low price.
• Don’t be greedy. Don’t be fearful. Learn to see those emotions in others to spot opportunities. People get greedy and blow things out of proportion. When people are fearful, and selling off too hard, that’s when you have the opportunity.
• A river of money, grab a bucket. Catching raindrops.

9. News information

• Made to sell you products (stocks, ETF mutual funds, etc)
• Usually wrong.
• Traded before you can even react
• You will never have all the information
• Has an agenda
• People in the industry are not introducing wealth. Brokers are broker than you.
• Is somebody going to buy or sell a million shares, and can I capitalize on that action? Take a bet, but over time you’ll have better bets. One bad trade doesn’t make you a bad trader.

10. Crisis = Opportunities

• Information
• Patience
• Risk/Reward
• Takedown opportunities immediately
• Know what you want ahead of time
• Have an idea in your head of what you want to pay before you get to the table
• Make decisions based on the best information available

11. Today is the beginning of the rest of your life

• People who say they can and people who say they cannot are both correct. Hone that decision-making muscle.

12. Principles for an awesome life

• Ruthlessly cut things that don’t provide value. Want less. Watch consumer traps. Sell or give away your crap. Don’t buy things you won’t use at least 1x a week. Rent or borrow, buy secondhand.
• Eating out vs cooking. Controlling variables.
• Proper diet and exercise.
• Focus on income.
• Saving makes you poor
• Assets vs liabilities invest for cash flow, not appreciation (bonus)
• Expand your risk tolerance
• Talk to everyone. Listen to your instincts.
• Fail often, fail better, succeed faster.
• Build teams to compliment your strengths.
• Don’t be a wantrepreneur.
• Have a 5-year plan.
• All you have is the present moment. Past = regret, Future = anxiety
• Meditation
• You are enough, and you know enough
• Dying, surviving, or thriving?
• Gratitude
• Abundance, pay it forward. Inspire others, but don’t caretake them.
• You miss 100% of the shots you don’t take.
• Be willing to tear down everything that’s not excellent.