Without getting into specifics (the scenarios could be myriad), which approach do you generally prefer?
I’m personally risk-averse. So I find losing $10 gives me more negative feelings than gaining $10 gives me positive feelings.
My whole life has been high risk / high reward generally I love it. Laterly, I’ve been getting tired of the roller coaster so I’m taking two last giant gambles that will hopefully leave me settled and secure for the rest of my life.
I’m low-risk, low-reward most of the time. But high-risk, high-reward every so often.
It depends on how much influence I have on the outcome and how much it depends on my skillset.
Stock market where I have no control? Low risk.
Work project where I get a massive bonus for insane deadlines? I can do that. Just infrequently. I enjoy my health.
It depends on the risk, and depends on the reward.
But at this point in my life, probably low risk, low reward.
Definitely a bird-in-hand man: I’ll not risk it for the “two in the bush”. It is an attitude borne of my life’s experiences and observations.
For me, the question can’t be answered because it depends very much on the specifics. To take a simple example: if you offered me a choice between betting 1 penny to win 2 pennies, or betting £1 to win £10 (with fair odds in each case, i.e. the former has a 1 in 2 chance of success, the latter 1 in 10), I’d go for the latter every time. But if the choice was between betting £1 to win £10, or betting £100 to win £1,000,000 (again with odds of 10:1 and 10,000:1 respectively), I’d pick the former.
(A) Over my span of years I’ve learned the phrase “don’t be greedy.” And while that usually means something else, I apply it to risk/reward situations.
(B) A similar situation exists when I’m asked for an immediate decision on an issue that benefits from analysis. I almost always decline or answer no because it’s cheaper/safer/no commitment.
Option (A) has been satisfactory over time; (B) not so much.
You left out a couple of options.
Given the choice, and with no details, I’d pick “low risk, high reward”: which is what many of the people bragging about how their risk-taking led to their wealth actually chose.
What I seem to have done in practice, if we’re talking about finances only as the reward, amounts to “high risk, low reward.” There are other rewards involved, of course.
I believe in moderation in all things, including moderation.
Assuming I could only go with one of the options, such as in investments requiring the same amount of money and I can’t afford to try both, I guess I’d pick low risk-low reward and wait for a better opportunity. In reality I have had both going on at once.
The trick is finding asymmetrical risk relationships. Low Risk / High Reward. And yes they do exist, you just have to know where to look. Generally the more investors that find them the more quickly they close.