No-one invests with the intention of losing money, but sometimes it happens. Nothing is certain in life – there’s always a risk that disaster will strike at the wrong time and an investment will end up not paying off. Of course, you can still take measures to minimise the risk of loss. Below are just a few different ways in which you can avoid bad investments.
Invest in What You Understand
Many bad investments are the result of people investing in things that they have no understanding of. For example, when it comes to stocks, it’s best to stick to companies that you know – don’t buy shares in a company you’ve never heard of just because their stock seems to be on the rise. Similarly, if you invest in property, don’t buy a property blind at an auction or attempt to flip a property without any knowledge of property flipping.
Spend time doing your research so that you know exactly what you’re putting your money into. You don’t have to be an expert, but it’s useful to have a basic understanding.
Diversify Your Portfolio
It’s better to invest in lots of different things than to invest all your money in one place. If you invest all your money into one place and this investment fails, you could lose all your money. If you spread out your investments and one investment fails but the others are all doing well, you’re likely to still make money overall.
This is known as ‘diversifying your portfolio’. When investing in stocks, try to invest in a variety of different stocks rather than putting all your money into one or two stocks. Even better, try investing in other assets too such as crypto, property or collectibles. Having some money in a high interest savings account is always a safe option too.
Hire Professional Help
If you don’t feel confident investing in a certain asset, don’t be afraid to hire professional help. Many people use asset management companies like Fundamental Global to manage their investments. By doing this, you can rely on an expert to make the right investments for you.
When it comes to real estate investment, there are many professionals who are worth hiring to help you with your investment. Property managers for example can take over the role of dealing with tenants, while there are property development companies that can help when renovating.
Limit Your Losses
It’s worth putting a cap on your losses so that you know when to pull out. This can allow you to walk away with some money rather than losing it all. Most trading platforms allow you to put in place stop loss orders, alerting you of when your instrument has lost a certain amount of value so that you can get out. When it comes to tangible investments, make sure that you’re getting them regularly valued to make sure they’re not losing value.