People invest their money to grow it. But many investments come with the potential risk of loss. As soon as you start losing money instead of gaining money, this is when you know that you’ve made a bad investment. But how can you avoid making these bad investments?
Unlike gambling, you can more easily control the risk when investing. You can almost guarantee a return by being careful about where and how you invest. Below are some of the different ways to avoid making a bad investment.
#1) Seek guidance from financial experts
Talking to an expert could be worth your time and money if you know little about investing. Raj Kalyandurg could help you manage your money by drawing upon their knowledge and experience. You can either pay for advice or a professional to handle your investment. You will have to pay a fee for this service, ultimately reducing the return you could have made. But you’re much less likely to experience a loss.
#2) Say no to risky high-growth strategies
There are many risky high-growth strategies out there that you can consider, such as penny stocks, mini-bonds, and crypto assets – however, these can easily lead to a bad investment because of how hard they are to predict. It’s a good idea to steer clear of these investments if you’re unwilling to gamble your money. Time-tested low-volatility stocks, high-interest savings accounts, and regular bonds are a much safer option. You won’t build your money as quickly, but the risk of loss is minimal.
#3) Invest in what you know and love
Investing in things you don’t understand or have no interest in is not a good idea. You’re less likely to invest in the right places and less likely to keep an eye on your investments if you have no passion for them or understanding. Instead, invest in things that bring you joy that you are fascinated by. Regarding stocks, this could include companies you love or feel have a rewarding social benefit.
Alternatively, you could invest in physical things related to hobbies and interests that you can use or display, such as vinyl, books, art, classic cars, or jewelry. Even if these investments lose value, they’re unlikely to feel like bad investments because you’ve invested in something that brings you an emotional reward.
#4) Diversify your portfolio
Putting all your eggs in one basket is never a good idea. Ensure you spread your investment funds among multiple instruments to spread the risk. A single company may go bust without warning, causing its stock to plummet. Still, the entire stock market will unlikely collapse, so it’s worth investing in many different stores from various industries.
And it would be best if you tried other investments beyond stocks, including very stable options like savings accounts and potentially more risky options like forex or collectibles. This article by Brian Baker explains precisely how to diversify a portfolio.
#5) Keep an eye on your investments
A bad investment can often result from taking one’s eye off the ball. By monitoring the value of your assets and setting loss limits, you can pull out of an investment that has turned south before you lose too much money. As for tangible investments like real estate and antiques, it’s essential that you physically maintain them so that they don’t lose value.