Risk Capital is money that you could lose and it would have no effect on your assets, it would have no effect on your savings, and it would have no effect on your monthly bills and expenses. Risk Capital is truly ‘extra money’.
The Risk Capital Hierarchy
Ideally, if someone taught you about money when you were young, you would already have the ongoing habit of saving part of your earnings. When the savings accumulated enough, you would purchase assets. Your assets would produce revenue – which could be used as Risk Capital in speculative investing.
If you are like me when I was beginning, you must start out finding ways to earn free Bitcoin. And while Bitcoin is money… it’s kind of separate from our regular living and job earnings with FIAT currency. So the little amounts of digital currency can be lost without risking your rent or mortgage payment, or your groceries…
Because these micro-bits of money can be lost without any consequence to you – that fits the definition of ‘Risk Capital’, no matter how small you are starting out. For me, this is the ‘killer app’ that Bitcoin represents – the possibility for anyone to start of from nothing and begin micro-investing to establish new habits and new thinking about money.
You are at an advantage to learn these financial strategies with cryptocurrencies because ‘Risk Capital’ has different emotional feeling connected to it, than does your survival money.