In terms of investing, know that reward and risk tend to move oppositely. Once you take more risks, there’s a bigger chance to lose your money, yet you often have higher upsides.
It is not impossible to invest without losing some of your money. In today’s market, where the interest rates are low, any guaranteed investment to not lose money would have small returns. For others thinking about investing, the main goal is to reduce the possibilities for some losses while increasing the amount you could make. How you do that exactly and where you place your money depends mainly on what kind of investor you are and the goals you have.
There’s No 1 Answer
An old man looking to forward to live off his investments has various needs from a young person planning to work about forty-five years or more. Also, somebody with lots of excess income has several needs from somebody struggling to make the ends meet. Whether you are starting small, even with small amount of money every week, you would want to have a portfolio that’s diverse. This only means owning not only the stocks, but also cash, bonds, and alternatives including shares in REIT or real estate investment trust.
Even within the stock portfolio you have, you would want to diversify. It just means owning shares of the companies in different industries and shares in operations of various sizes. Through not having all your eggs in a basket, you give protection to yourself against the outside forces. For instance, if there’s an event that hurt the oil stocks like the breakthrough in electric vehicle technology, may benefit shares in the parts of technology sector.
Ways to Be Safe
Buying cash equivalents is the probably the safest and best way to invest without losing some cash. Money markets, CDs or certificate of deposit, treasuries, and corporate bonds provide stable returns with limited risk and in several cases, no risks at all. The only problem is that safety may come with a price.
To examine a cash equivalent, CDs constitute an agreement in which you give your cash to a certain financial institution for a particular period of time in exchange for set interest rates. You might receive two percent for a year CD and more for a long period of time. These are also save investments, yet they have no upside beyond whatever interest rates you are being paid.
Stock Market – Is It Still Safe?
Investing in stocks comes with some risks as well. Companies could lose value or they could go bankrupt. However, in the long run, the market has gone up steadily. Investing for short term also comes with risk. The reason behind it is that any company, no matter what their history is, could experience a huge drop in the share price and there are times that it can’t be controlled. But, such blips do not matter. Over a decade or more, the market continues to rise.
It is also important to remember that once you purchase individual companies, following the saying that you should purchase what you only know. This means that you should not chase the trends and follow the tips from somebody else if you do not understand what you are buying. Start with companies you like to do business with. You don’t have to know the outs or ins of the financials of the company, yet it is also wise to read up before you buy. You must also know about the prospects and plans of the company.