There is nothing that matches the emotions and excitement created by winning business. This driving force can make it difficult to stop and think about what risks you are taking and in what way you should manage your money so as not to risk too much. In this post I intend to talk a little about risk management when dealing with equities, funds, currencies and other types of investments.
For those who want to create sustainable investments and continue to make money for a long time, it is important to learn how to manage the risk. This can be difficult for anyone who is involved in investing, both beginners and veterans, but it can be especially difficult at first when you gain a better understanding of risk through real market experience.
Tips for managing risk when investing money
Managing the risk will affect the size of the business, the choice of investments and how you basically think when investing your money. By being responsible and using common sense, you can build up a savings where you have a reasonable risk. Here are some ways to limit the risk.
Only invest money that you have
One important thing is to invest only money that you actually have and that you are willing to lose. Of course, it sounds silly to say “money that you are prepared to lose”, because the idea is not to lose them. However, it just means that you should only invest money that you can afford to lose. Investra only saved money that you have over and do not take money you need for your everyday economy or buffer savings etc.
You have to decide how much of your assets you are willing to risk for each business. This doesn’t have to be the same percentage for every type of business, but you can start with the 1% rule. In that case, you risk no more than 1% of the money you have in your account for any individual placement. Depending on the deal and your situation, this could be increased to 2%, 3% or even 5%.
The point is that you should not put all your eggs in the same basket. Spread the risks and make sure you do not spend too much money on an individual investment. Also, review your existing investments at regular intervals and balance the risk. Sometimes an individual share (or whatever you have invested in) can rush away and suddenly account for an excessively large percentage of your total portfolio, and then it is good to redistribute a little.
It is good to use stop orders. This rule of thumb applies to all types of trading strategies. A stop order means that you set a maximum limit on how much you are willing to buy for or a minimum limit when you sell. This means that you only make a purchase / sale if the price reaches the level that you think is ok.
You get to analyze the data and think about what you think is a reasonable price for your stop order. By setting these limits you do not risk selling at too low a price or buying at too high a price. It acts as a kind of barrier to protect you and your money from bad business.
Think about your strategy
It is important to have some type of investment strategy. Think about how you want to invest. Often you choose long-term investments, especially if you are a regular saver. Once you have a strategy, you also have to stick to it. Invest in things that fit your strategy and try to think about your strategy as you sell.
Do not let yourself be caught up in the stress of the moment, which can affect you to make quick decisions that you will then regret. It is easy to keep stocks and the like for too long just because you want to milk out max or because you hope the investment will recover. Sometimes you have to be able to take a loss and know when to get off the train.
To learn from a loss
Losses will come sooner or later. It’s something that’s safe. The rule of thumb is to try to limit your losses so that you lose a little and win a lot. It is not always easy to follow this rule, but regardless, one should try to learn something from their losses.
Learn from what went wrong, why the investment has lost value and try to figure out what you could have done better. You don’t have to be discouraged by the losses. Just bring new lessons and try to do better next time.
Do not take out loans to invest
The first tip was to invest only money that you can manage without. This tip also includes that you should not take out a loan to get money for investment. It doesn’t always make a profit when you invest and sometimes you can lose money. A loan means that you have to pay back the money plus interest and if you have a little bad luck or have a bad period then you can put yourself in big financial problems.