Managing Investment Risk: With a Simple Analogy

Mapping investments to the Mohs scale of hardness is an interesting analogy that can help illustrate the relative resilience and stability of different investment types. Here's how we might conceptualize this:

Investment Hardness Scale

1. Cash (Talc): Highly liquid but offers little resistance to inflation.

2. Savings Accounts (Gypsum): Slightly more resistant than cash, with minimal interest.

3. Certificates of Deposit (Calcite): More structured, with penalties for early withdrawal.

4. Government Bonds (Fluorite): Generally stable, but can be affected by interest rate changes.

5. Corporate Bonds (Apatite): Harder than government bonds, with higher yields but more risk.

6. Real Estate (Orthoclase): Tangible asset, resistant to some market fluctuations.

7. Blue Chip Stocks (Quartz): Well-established companies, relatively stable in the long term.

8. Growth Stocks (Topaz): Higher potential returns, but also higher volatility.

9. Commodities (Corundum): Hard assets like gold or oil, often used as inflation hedges.

10. Venture Capital/Private Equity (Diamond): Highest risk and potential reward, least liquid.

Key Considerations

Diversification:

Just as a geologist uses various minerals for different purposes, a balanced investment portfolio should include a mix of "hardnesses".

Risk Tolerance:

Your personal risk tolerance determines how far up the "hardness" scale you're comfortable investing.

Time Horizon: 

Longer investment horizons generally allow for "harder" investments that may be more volatile in the short term[5].

Liquidity Needs:

"Softer" investments are typically more liquid, while "harder" ones may be difficult to sell quickly.

Remember, this analogy is not perfect. Unlike minerals, investments can change in "hardness" over time, and market conditions can affect all levels of the scale. Always consult with a financial advisor to create an investment strategy tailored to your specific needs and goals.

Finally, Cryptos may be mapped to a Mohs scale as well.  Stablecoins, on the harder end, Well established ones like Bitcoin in the middle and smaller Altcoins on the softer end.

Disclaimer :: comparison is metaphorical rather than literal.