The state of Louisiana has approved the Historical Designation for the Entergy station. This is great news for anyone invested in Market Street because it releases more tax credits for the project. The federal government is expected to rubber stamp the approval in the next couple of weeks and then the site will be added to the national registrar of historical places. The area in which the building is located, the lower garden district, is already on the Louisiana Historic Preservation list.

The state is also in process of approving funds to extend the river walk trolley to the Entergy site.

We at PERSONNIQ will be sure to inform you of when these events occur and keep you updated on more information as it is released.

Risk Tolerance. For the average person I think I might as well have started off by typing: Quantum Physics. This is not a slight against the average person, however. It’s a tricky business that escapes an easy method of quantifying. If we don’t take the time to try, we may end up confusing risk with chance.

When this is done, we tend to make risk a black and white concept. Either something is risky or it’s not. When you drill down farther you find that it’s all about perception and emotion. The consequences of letting emotions dictate risk tolerance when it comes to investing are long lasting; mainly in missed opportunities, but also in under-performance or even losses in what you perceive to be ‘safe’ investments.

The reason many let their emotions take the wheel for the risk trip is that understanding risk can be difficult. Most of the published definitions of risk agree that the components are the probability of a negative result and the impact of a total loss. Thus, it is easy to illustrate why risk is not an absolute concept. Trying to quantify risk by estimating loss probability combined with loss impact is, to say the least, not an exact science. So, we rely on our perception to guide us away from trouble. You know, good old common sense?

Look at the lottery. I realize that the lottery shouldn’t have anything to do with one’s financial future. Unfortunately, it was the number two answer in a recent poll that asked Americans how they planned to have enough money to retire (number one was ‘sue somebody’). The probability of losing your lottery investment’ is astronomically high. Yet the impact of the loss is extremely minimal if you only buy one ticket. Even though one is virtually guaranteed to lose their investment, the high risk is ignored because the possible payoff is so great. This example illuminates a third component that is not always discussed when defining risk: reward.

The human behavioral concept of cognitive dissonance helps explain why this can happen. Simply put, if your actions go against what you believe, it creates an internal tension that must be resolved. Either you change your action or you change your belief. Belief: I don’t take risks with my money. Action: I purchase a lottery ticket with almost certain chance of loss. This contradiction creates an internal tension or unease. New belief: I don’t take risks with my money unless the payoff is enormous. Or put another way, if I lose my investment I won’t be embarrassed because of how much I ‘could’ have gained plus the minimal impact of donating my George Washington. Plain and simple, this is an emotional decision.

Look at this from a different angle, relating directly to investment and financial planning. If how you will feel if your investment is lost is closely tied to the return you expect to receive, you could be paralyzed from making sound choices. Consider the following example: You have the opportunity to put $50,000 into a 6 month investment. Your return will be $3,500. What?? I only get $3,500 for RISKING $50,000? If you are stuck in this frame of mind, you may prevent yourself from looking at all of the details of the investment. The return on this investment is actually 14% annualized. That’s a pretty good deal for only having your money tied up for 6 months. If you are focused on how foolish you would feel for losing $50k in order to only make $3500, you might not take the time to fully analyze the true probability of losing your initial investment. What if there is collateral? What if the collateral is worth even more than the $50,000? What if there are safeguards against a total loss? These are important questions, but many people prevent themselves from making good financial investments because they confuse investing with gambling, risk with chance.

The ironic thing is that more people gamble their money than invest it! Maybe it’s the fear of the unknown. Arguably investment risk cannot be measured, only assessed. Whereas with gambling, at lest you know your odds of hitting black 29 are 37 to 1 – even though you only get paid 35 to 1 if it hits.

The moral of the story is, of course, investing is not gambling. Even though there is risk in almost all investments, when you do your homework and use a professional for guidance, you will inevitably be more comfortable with your money properly invested than cashed in for casino chips.

Chris Priebe has been helping his clients with their mortgage, real estate and investment needs for the last 5 years. Through these combined efforts he has been able to educate a great many people on the ‘new rules of money’.

“Properly managing your money isn’t just about good investing. It requires utilizing every aspect of every asset you have to the fullest potential” – Chris Priebe.