Risk Frequency > Risk Volume
It’s not about taking bigger risks.
It’s about taking more risks.
Most success stories about entrepreneurs and investors focus on the risk someone took to succeed.
Starting a company requires risk, often more risk than most people have the stomach for.
But what’s often missed is the volume of risk required.
A stable investment portfolio is built on diversification: many small risks spread across multiple assets. When one investment performs poorly, the portfolio remains strong because no single risk controls the entire outcome.
The old saying applies:
“Don’t put all your eggs in one basket.”
However, this advice can sometimes lead to decisions that are too safe.
The idea that helped me reconcile this is simple:
Risk Frequency > Risk Volume
Taking more risks creates more opportunities for success.
Taking bigger risks may be rewarding, but it can also be destructive.
Large risks sometimes work. But when they fail, they often destroy the individual taking them.
So what exactly does it mean to take more risks instead of bigger ones?
Example 1: The Big Risk
Your cousin is starting a promising company and asks you to invest your entire life savings.
There is a real chance the company could succeed.
But it requires all of your capital.
You invest.
Six months later, the company closes.
Instead of a manageable loss, you now have no savings and no remaining investment options.
That is risk volume.
Example 2: The Frequency Approach
You want to start your own business.
Instead of quitting your job the moment you feel motivated, you keep your job and begin building the business gradually.
You test ideas.
You improve the product.
You develop customers slowly.
Over time, one of two things happens:
- The business grows large enough to replace your job.
- The business fails, and you move on to something else.
Either way, because you took many small risks instead of one large one, you preserved your ability to continue moving forward.
Investing Works the Same Way
Index funds and mutual funds thrive on this concept.
Instead of putting all your capital into one stock, you invest across many companies.
Some will fail.
Some will stagnate.
A few will perform extremely well.
By increasing the number of opportunities, you increase the probability of success.
So What?
This mistake appears constantly when people try to move from their current economic position to the future they want.
Motivational culture often glorifies massive, dramatic risks.
When those risks fail, the result is often painful enough that people stop taking any risks at all.
And that is where the real problem begins.
The Risk of Doing Nothing
In economics, there is a concept called opportunity cost.
Opportunity cost is the cost of not doing something.
One of the greatest risks a person can take is living paycheck to paycheck until age 65.
The cost of doing nothing may be the largest risk of all.
Taking one massive risk exposes you to:
- winning big
- or losing big
Taking many small risks increases your chance of winning.
But refusing to take risks at all creates a hidden risk:
The risk that you will continue living, working, and earning exactly as you are today for the rest of your life.
History shows that societies, and economies, reward those who experiment, adapt, and try repeatedly.
Life moves in stages.
Failing to take advantage of your current stage carries a massive opportunity cost for the next one.
So take risks.
Just take more of them, not larger ones.
Effective Risk Management
Risk Frequency > Risk Volume
3.13.26
By Noah Cisneros
Disclaimer:
This article is not sponsored or approved by any financial institution that I am associated with. I am NOT a certified personal financial advisor. I am NOT a professional investor. This article is purely educational to provide helpful ideas to improve life. Please use the tools within your reach to personally make any and all decisions for your finances.
Noah Cisneros 