Losing money while investing is a common thing for those who aren’t in the know.
Striking the balance between playing it too safe and being too risky with your money can have devastating results. On one hand, you play it too safe and miss out on a lucrative investment deal and on the other, you play it too risky and end up losing it all. What we all can agree on, is how painful it is when money is ripped from our hands, sometimes accidentally or due to our own stupidity – it hurts like crazy.
All we can do is learn from each other’s mistakes. So let’s consider these ways we can lose our money when investing – and how to minimize the hit, in some cases.
Not having your financial house in order.
We’re very busy but sometimes, when we are not financially organized, we encounter unexpected events such as loss of income or hospital bills. These unexpected things cause us to dig into our savings and eating into the gains we have made in our investments. Unless you plan for these unexpected events, your own growth may be hindered.
Minimizing the HIT: Get your financial house in order – try to cover all loopholes and make the most of what you have.
Investing without understanding the risks.
Unfortunately, a vast majority of us are drawn to make investments merely by the returns promised. Realize, a high rate of return means high risk – merely investing without thorough consideration is really playing with fire. Learn how many hits you can accommodate will help make better decisions as to what sort of investments to make.
Minimizing the HIT: Two things can be done to manage risk: (1) Understanding how much risk you can take – always ask yourself, “If I lost all this money in this investment would I be okay?”; (2) Do not place all your eggs in one basket – diversify your investments and reduce your overall loss.
Not selling off bad investments.
Sometimes, we find ourselves holding onto bad investments in the hope that they will recover. Bad move. Realize that we all sometimes make bad investments, but holding onto them is a bad decision. Think of the further loss, on the current loss you are incurring. Time is money. So let’s not be too stubborn and prideful to take the loss – protecting our previous choices or decisions by holding on is even more disastrous for our investments.
Minimizing the HIT: Avoid this common investing psychological trap and sell off the investment. The sooner we get out of it and into something more promising the better our chances are.
Always chasing so-called hot investment trends.
Emotions tend to be very high when new investment opportunities crop up – everyone is doing it ideology creeps in and you don’t want to be left behind. We have a history of a lot of these coming up and many burnt their fingers trying to make quick easy money. There is no such thing as quick easy money.
Minimizing the HIT: Conduct due diligence. Always.
Losing money is often easier than making it if you’re guilty of these investing faux pas, then lookout for more on our next article on the common investing psychology traps to avoid.
Happy Investing!
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