A few years ago, I began investing $500 a month in Bitcoin. Although its value was going up, I was still afraid of losing my investment. So, after a little more than I year, I sold my shares.

I had put in $8K and got out about $14K, so it felt like a win.

...Until I checked the exchange recently. If I had left my investment in and not touched it, it would be worth $100K today.

If I had continued putting in $500 every month, the value would have been close to $200K.

And if I had the confidence to put in a little more, like $1-2K per month instead of just $500, my shares would be worth close to half a million dollars.

The opportunity was there, and I just didn't seize it.

Lack of Money... or Lack of Courage?

My experience illustrates that, when it comes to investing, the greatest constraint is not the lack of money--although that's what most of us think.

The biggest constraint is fear.

Fear, more than anything else, is what holds us back from acting.

Fear of the unknown.

Fear of taking risks.

Fear of loss.

Fear of looking stupid.

Because of fear, we're at risk of never taking action.

We're hard-wired to avoid risks, because in the time of our ancestors, failing meant getting killed. As a hunter gatherer, if you didn't go for the sure thing, you would starve.

As a peasant in the middle ages, one wrong move that crossed your king or lord could mean losing everything.

Even a couple hundred years ago, before modern medicine, the simplest injury could lead to infection and death.

That taught us to be wary of taking risks. In that context, thinking like an entrepreneur wasn't a good idea, and could very well get you killed.

Our survival instincts are so strong that we'd rather avoid loss rather than pursue gain. In fact, according to behavioral science research, just choosing between potential loss and potential gain changes our comfort level.

For example, a lot more people would undergo a medical treatment with an 80% survival rate than a treatment with a 20% mortality rate--even though they're exactly the same thing!

I like to say that failure is only failure if it happens in the last chapter; otherwise, it's a plot twist.

For most of human history, failure would make failure the last chapter, but times have changed. We now live in a world full of second, third chances, and more. When we forget this, we make the wrong choices--like I did with my Bitcoin investment.

It's Not About Careless Risk-taking, Either

Of course, I'm not advocating careless risk-taking, either.

Risk is "the likelihood of an irreversible negative outcome," Tim Ferriss says.

So, the one important question to ask is: "Is the possible negative outcome irreversible?"

Read that again and focus on the word, "irreversible." If the negative outcome isn't irreversible, then it isn't a big deal.

Once upon a time, most things that could go wrong were permanent, but not anymore.

Nevertheless, you do want to be careful to limit risk, but without worrying too much about stuff that doesn't meet that bar.

How to Calculate Risks

Make a list: What's the worst that could happen? What have you got to lose? And which ones are irreversible? Think of all the worst-case scenarios possible.

This is the part where you have to be careful, because we tend to overestimate what could go wrong.

But that isn't the craziest part of how we think of risk. As much as we over-estimate the downside, our instincts are to completely ignore the upside!

When calculating risk of an investment or opportunity, we often assume there is no upside. You treat it more like buying a lottery ticket: "I don't know what the upside is, so I assume it's a lot. And I don't know what the downside is, so I assume I'll lose everything."

That perspective is disempowering and leads to bad decisions.

Assuming you've made a list of reasonable--not overblown--worst outcomes, then create contingency plans for them. In many cases, you'll realize that the worst-case scenario isn't that bad.