Tips on Minimizing Potential Losses


tips on minimizing potential losses

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.

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Comments

  1. says

    I especially like #2. It’s just sad that MLM/networking are capitalizing on this. I’m not saying its downright fraud, but often people would “buy in” on the business even if they don’t really use or like the product offered. They entice people by letting them believe na basta makarecruit ka may kita ka. I don’t call that business, that’s manipulation.

    • mark says

      Not all, it depends on the company background and their compensation plan. One simple rule (and this is based on existing Philippine laws): if the earnings depend on the new recruits, then stay away from them.

  2. JP Yu says

    Stock Market 101: “Diversification” – Don’t put all your eggs in one basket.. Allocating your investments in other sector/industry or company to minimize risk and potential loss…

    My say: Diversification is only for average investors who wanted to always play safe but not playing “smart”… just like what the world’s greatest investor of all time “Warren Buffet” said – Don’t diversify rather focus… For me diversification is like having a gun shooting everywhere waiting for a chance to make a hit while loosing all your bullets, why not aim for your target focus and take a shot if you miss take another one practice makes perfect.. Playing in stock market is already a risk minimizing the risk of the risk doesn’t make sense at all, you have to do your homework research and educate yourself increase you financial IQ don’t play it safe rather play it smart… If you’re confident about the company you’d like to invest to base from your financial analysis focus your investment and your financial goal and time will make it grow for you…

  3. lemzki says

    Please suggest any finance/stock related books that can get me started on investing. Mas natututo kasi ako sa libro kasi nakakalimutan ko pag sa videos lang.

    • says

      Financial Management Principles and Application !0th Edition by Keown, Petty, Martin and Scott, Jr. Since market discount everything, you can learn from this book the why and how corporations work and decide certain business decision that affects their stake holders. It’s comprehensive too!

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