“Investing, isn’t that very risky? With that you can lose all your money, right? Or even worse: getting into debt?” If we got a euro for every time we got this question, we would have a fine source of income 😉 But no, investing is not very risky. At least, it doesn’t have to be, you can minimize your risk quite a bit. And lose all your money? Then you must be a huge stumper. So how risky is investing? Let us explain:
How risky is investing: minimize and eliminate
You can never
never eliminate 100%, but you can minimize
. With investing, you can take a lot of risk; you can also do it relatively safely. Investing is inherently more risky than saving, but if you do it smart then investing especially much more lucrative than saving. It all depends on the choices you make around your investments. Thus, it is important that you properly diversify the products you invest in, don’t let emotions and a sense of FOMO and Invest only with money you can spare. Before investing, it is important to make a plan, preferably a long-term plan. This prevents you from storming that stock market like a cowboy and taking too much risk.
Psst: want to learn everything about investing, from risk minimization, to diversification, to selecting ETFs? In the “Starting to Invest” e-course you will learn to invest with confidence. Sign up here.
Volatility
In the stock market you always have to deal with
price fluctuations (volatility)
, there is (almost) no getting away from this when investing. The stock market reacts to the economy and it sometimes flourishes, and sometimes falls into depression. It’s just like a human being! But history shows that there is always a
upward trend and that stock prices
recover after each dip.
Smart investing
The purpose of investing is to make
benefit financially
. And with common sense and a clear plan, this is achievable. But the choices you make do make a lot of difference in how much risk you run. Our vision: invest for the long term, so don’t do panic soccer. Then those risks are not so bad.
In addition, ensure a
proper distribution
. Don’t just buy Amazon shares, but spread your money across different investment products. For example, you may have heard of bonds, which are loans you make to a company or a government. This product carries much less risk than, say, a share of a company in an emerging market. Read more about applying diversification here.
“How risky is investing?” is thus a question that cannot be answered unequivocally. If you start investing smartly, with a good plan, and are aware of the different types of investments and their associated risks, you can certainly minimize your risk tremendously and get great returns over the long term!
