When you start investing people will often say to you “only invest with money you can afford to lose” which makes sense in one way. However, to make money in the world of investment there always needs to be an edge, a risk and something to focus your mind. If you are simply investing money “you can afford to lose” how will this focus your mind? Read full article here
One thing that many novices may not be aware of is that some investments are far more risky than others. US treasury bonds are theoretically the safest investment... while long and short stock positions on thinly traded small cap stocks that earn little or no money and tend to have poor fundamentals - but that have a tendency towards extreme volatility in both directions - tend to be the riskiest investments and should be handled very carefully. Most investments fall somewhere between those two extremes.
The greater the risk the great the potential reward - in theory. You should always be aware of this - is the potential return reflective of the greater risk you are taking? As you get older and move towards retirement there will be times when you might need to reduce your risk profile to try and protect/maintain your portfolio value going forward.
Agreed. I tend to tread very lightly with the extremely risky investments. I am more aggressive with more stable, fundamentally sound investments. As one gets closer to retirement and into retirement, better for most people to have most or all $ in relatively safe, solid investments that pay good interest and dividends. Of course a retiree with $10 million or more has more $ to play around with than a retiree with $1 mil or less who needs to make every dollar count in order to have sufficient income $ for life to live on.
