There is no such thing as a risk-free investment. Every investment, legitimate or not, can incur a potential loss and may wipe out your money altogether.
To avoid this from happening, here are some tips to help you minimize potential losses:
1. High Returns = High Risk
If you want an investment that has high returns, you should also be willing to accept high losses as well.Invest according to your risk tolerance.
2. Just because it is earning does not mean it is safe.
At first, people may earn from scams. This way, more victims will be enticed to join. What they do not know is that once they invest, their money will be used to pay off old investors. What will happen if there are no new investors? Even if you are holding a post-dated check, it does not necessarily mean that you will get paid.
3. Invest only what you can afford.
Do not invest if you can’t afford it at this time. Never ever borrow money just so you can invest or risk your child’s education fund in the hope to multiply your cash. You may end up with crippling amounts of debt just because of a wrong investment decision. If you really want to invest, why not get it from extra money that you can afford to lose?
4. Do not be greedy.
As soon as you start earning, make it a priority to recover your capital. This way, even if something bad happens you will just lose your profits.
5. Do not put all your eggs in one basket.
There is no such thing as a super investment that will take care of everything. This is the reason why Pesos and Sense tackles different kinds of investments. There is short term and long term, low risk and high risk. Make sure that you diversify. So incase you incur a loss, you will not lose everything you worked hard for.
Question: Do you have other tips to minimize potential losses? Share them below.
Understand the risks and rewards in every investment.
You can also learn from our Basic Investing Seminar.