What Can Go Wrong With An Investment?

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If you find yourself posing that question, I’d like you to look at things in a different way. For example, I’d pose the question: “What can’t go wrong with an investment?” When you invest your money you need to make sure you understand the downside, because it can be enormous. It’s great to have a positive attitude in life, but when it comes to investing, some sheer skepticism can come in handy.

You can lose 100% of your capital in an investment in the stock market

And, if you add margin to the debacle, you can actually lose all of your capital and then some! This should be enough to keep just about anyone wary. If you set stop loss orders, you can at least relegate your losses to a fixed amount. But if you don’t, and adopt a foolhardy mentality, you can literally lose every dollar you put into a stock market investment.

Now you see why savings account returns are low and the stock market tends to be higher. It’s because you risk everything ever time you trade.

I think you can still earn big returns on investing in the stock market, so don’t get me wrong. Go ahead and take the risk. But don’t ever forget that nothing is guaranteed, and everything can change in an instant. Protect your downside as best you can.

What ways can you think of to protect against loss when investing in the stock market?

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