Risk vs. Reward: A Practical Guide for High-Achieving Investors
By Gaurav Kumkar, CEO of Majestic Investment Group
At Majestic Investment Group, we have high income and net worth doctors, technologists, and business professionals who have built careers and wealth through hard work and smart decisions.
It’s important to understand about risk versus reward. Get this balance wrong, and you either leave money on the table or lose sleep (and capital) you can’t afford to lose.
No two people have the same comfort level with risk. A 35-year-old surgeon with young children thinks differently from a 62-year-old tech founder planning retirement. Thus, someone’s investment choices may not be appropriate for everyone.
Biggest risk is not taking any because the money or cash is constantly losing value against money printing, inflation, assets appreciating. Investors need to understand “all investing involves risks”.
At Majestic we provide opportunities, analysis, due diligence, risk diversification but we are NOT financial, legal, tax, retirement advisors. Being a technologist turned full time investor, We are no Warren Buffett nor we claim to be Elon Musk, therefore, utilizing tools and frameworks to become better investors one opportunity at a time!
Why Risk Appetite Is Personal
Risk tolerance comes from objective facts (your numbers) and subjective feelings (your gut).
Factor |
What It Means |
Example |
|
Age |
Younger investors have more time to recover from losses. |
A 40-year-old can ride out a dip; a 70-year-old may not want to. |
|
Health |
Poor health can force early retirement or big medical bills. |
Someone with a chronic condition keeps extra cash handy. |
|
Income Stability |
Steady paycheck = more room to take calculated risks. |
A tenured physician can explore more than a startup founder. |
|
Family Responsibilities |
Kids in college, aging parents, or a non-working spouse change the math. |
Supporting three dependents usually means lower risk. |
|
Net Worth & Liquidity |
More assets = ability to lock up money longer. |
$1M liquid lets you try more riskier investments |
|
Experience |
Wins build confidence; losses teach caution. |
An investor who lost in 2008 avoids anything “speculative.” |
|
Time Horizon |
When do you need the money back? |
Retirement in 5 years = preserve capital. 20 years = grow it. |
|
Sleep Factor |
Can you check the numbers at 2 a.m. without panic? |
If a 20% drop ruins your week, stay conservative. |
Step-by-Step Framework to Pick Your Comfort Zone
- Review Your Snapshot Notice patterns. Are you leaning toward safety or growth? Do most factors point to protecting what you have, or do they give you room to reach further?
- Match Your Comfort to Rewards You Want Different assets deliver different payoffs. Pick the ones that fit both your profile and your goals.
Reward |
What It Means |
|
Passive Income |
Monthly or quarterly cash flow with little work. |
|
Tax Efficiencies |
Depreciation, cost segregation, or energy credits that cut your tax bill. |
|
Capital Appreciation |
Value grows over time; sell later for a lump sum. |
|
Asymmetric Bets |
Small money in, big money out if it hits. |
|
Economies of Scale |
Bigger deals spread costs and boost returns. |
|
Diversification |
Spreads risk across unrelated assets. |
Choose Your Asset Mix
Use the table below. It shows risk level and primary rewards for seven popular asset classes.
|
Asset Class |
Risk Level |
Primary Rewards |
|
Senior Living |
Lowest |
Passive income, tax efficiencies (depreciation), diversification |
|
Self-Storage |
Low to Medium |
Passive income, capital appreciation, low overhead |
|
Multifamily |
Low to Medium |
Passive income, tax efficiencies, economies of scale |
|
Retail NNN (Triple Net Lease) |
Low to Medium |
Passive income, long-term stability, inflation hedge |
|
Construction (Value-Add or Ground-Up) |
Medium to High |
Capital appreciation, tax efficiencies, economies of scale |
|
Venture Capital |
High |
Asymmetric bets, capital appreciation, diversification |
|
Oil & Gas Drilling |
High |
Asymmetric bets, tax efficiencies (intangible drilling costs), passive income (if producing) |
Final Thought
Risk is not the enemy; mismatched risk is. Not educating or Not thinking for yourself is risk. Biggest risk is in-action!
Legendary Investor References
|
Investor |
Core Risk Philosophy |
Key Tactic for Risky Investments |
Resource |
|
Warren Buffett |
Permanent capital loss from ignorance |
Long-term hold in understandable businesses with margin of safety |
Berkshire Annual Letters |
|
Ray Dalio |
Balanced exposure via uncorrelated assets |
Risk parity in "All-Weather" portfolios |
"Principles: Life and Work" |
|
Peter Lynch |
Inherent in pursuit of growth; mitigated by research |
Buy undervalued growers hold through volatility |
"One Up on Wall Street" |
|
Howard Marks |
Multifaceted (e.g., hidden biases); essential for returns |
Contrarian buys; avoid losers via deep analysis |
Oaktree Memos Archive |
