The 'Lawnchair Larry' Guide to High-Risk Investing

On July 2, 1982, a truck driver from North Hollywood named Larry Walters decided to fly. He didn't use a plane. He went to Sears, bought a patio chair, 45 industrial-grade weather balloons, and a pellet gun.

His plan was to attach the balloons to his chair, float a few hundred feet over the desert, and then pop the balloons with his pellet gun to gently descend. He also brought a six-pack of beer and some sandwiches.

When his friends cut the tether, Larry didn't float gently. He shot upwards like a rocket, climbing to an altitude of 16,000 feet—smack into the primary approach corridor for Los Angeles International Airport. He was so startled, he dropped his pellet gun.

For hours, pilots radioed in bewildered reports of a "man in a lawnchair" at their altitude. Larry drifted, frozen and terrified, until he eventually floated into power lines, causing a 20-minute blackout. He was, miraculously, unharmed.

Larry had a dream. He had a vehicle. But he had done no math. He had no risk management. He was gambling, not investing.

In the world of finance, we are constantly tempted to be Lawnchair Larry. We hear a story about a friend making 10x on a meme stock or a cryptocurrency, and we want in. We get FOMO (Fear Of Missing Out) and are ready to tie some balloons to our life savings.

High-risk, high-return assets can have a place in your portfolio, but only after you follow a strict, pre-flight checklist. Undisciplined risk is gambling. Disciplined risk is investing.

Your 7-Point Pre-Flight Checklist (Don't Be Larry)

Before you put a single dollar into a speculative asset, you must be able to check all seven of these boxes.

1. Is Your Foundation Built? Do you have your 3-6 month emergency fund? Is your high-interest debt paid off? Are you contributing to your 401(k) and a low-cost index fund? If the answer to any of these is "no," you have no business buying high-risk assets. You are trying to build a chimney on a house that has no foundation.

2. Do You Understand It? Can you explain how this asset generates value to a 10-year-old? If you can't, you don't understand it. "It just goes up" is not an explanation. Hype and complexity are red flags.

3. Can You Afford for It to Go to Zero? Assume the money you put in will be vaporized. Will this materially impact your long-term security? If it will, you cannot afford the risk. This money must be "casino money"—capital you can light on fire and still sleep at night.

4. Have You Sized Your Position? This is the most important rule. High-risk plays should be a small, defined fraction of your total portfolio. A common rule is no more than 5%. If your total portfolio is $100,000, your entire "speculation" bucket should not exceed $5,000.

5. What is the Risk/Reward Ratio? The potential reward must significantly outweigh the risk. For every $1 you risk, you should have a credible path to gaining $3, $5, or $10. If you're risking $1 to make $1.10, that's just a bad bet.

6. Do You Have a Time Horizon? Are you holding this for a week or a decade? High-risk assets are volatile. Decide your holding period before you buy. This stops you from turning a failed short-term trade into an unplanned, disastrous "long-term hold."

7. What is Your Exit Plan? Hope is not a strategy. You must define your exit points when you are rational, not emotional. Write down two numbers:

   • Your "Take-Profit" Price: The point where you will sell and lock in your gains.

   • Your "Stop-Loss" Price: The point where you will sell and cut your losses.

   This protects you from your own greed and fear.

Don't be Lawnchair Larry. Do the math. Build your foundation. And always, always, remember to bring your pellet gun.