For most people risk is a word that has meaning by itself. When something is said to be risky it means the uncertainty of success, failure, or the status quo. For years I have thought that things in and of themselves had different “risk” levels. As the years have progressed though I have started to belief that the word “risk” is actually an other term for “level of understanding”. When someone says that an investment is risky they are not saying that the investment itself is risky, they are saying that they do not know enough about the investment to know whether it will be a success or a failure.

For instance, a few years ago I purchased a house to rent as an investment. I’ve been renting the house now for two years and through the process have learned the associated costs and benefits. When talking to most non-real estate investors about my rental situation they proclaim that it is too risky for them to undertake a similar venture. They usually follow up with statements such as: “I don’t want to have to cut the grass and fix the toilet” or “what happens if I can’t rent for six months!?”. To them these are pertinent and “risky” things. What they are actually expressing though is their lack of knowledge in the home rental industry. What seems risky to them seems simple to me.