Risk is something that every investor has to consider. Every time you put money into the market there is always the possibility you won’t get some of it back, or potentially all of it back. On the other side of that coin you could get all of it back and much more. One of my friends asked me this week how I know I will make money in the market. When I replied with, “I don’t” this only further confused her. She asked, “Well then why put money in?” I attempted to answer her question by opening my Robinhood app and explaining why I invested in XYZ company, how long I’ve been invested and what to look for when investing.
What do I look for and how do I avoid risk? There is not sure fire ways to avoid risk, but there are plenty of ways to reduce it. When I want to invest in a single stock I do my homework. I look at all the ratios I have available to me. I research company price chart history. Lastly, l look for any resent news stories about the company. Using all of these things if everything checks out and my gut agrees, I make an investment. Something I think is important to note is that just because you find one or two things you are uncertain about in a company, I would not write them off as a bad investment. I have had many investments where there were plenty of warning signs in a company, but they still made for a great investment. NVidia for example, has been all over the place in the resent months. By studying their charts long enough I was able to see a pattern in their stock price, and I played that to my advantage by investing for short periods of time when I thought the stock would be going up. Once I saw signs of the stock price peaking, I sold my shares.
If you are just starting out, or lack confidence in your investing abilities a great option for you would be to diversify in many large stable companies (Apple, Google, etc.). This will provide stability as well as teach you the fundamentals of investing. Another great option is to invest in an ETF. ETF’s are a great way to get your feet wet in the world of investing. They are a stable option, put together by experienced individuals. Another benefit of ETF’s is that they are generally low cost shares. So if you’re looking to invest but don’t have a lot of money to do so, this is a great option.
I hope this was helpful for you and gave you some clarity about risk and how to handle it in your own investing endeavors. Until next time! Thanks for reading.