It is very important when investing to think of risks before profit, whether in stock or property investing. Do we need to learn through the painful way of losing huge sum of money before we learn how to think of risks before profit.
Also there is such no investment that is low risk, and moderate return; otherwise, this investment will definitely be overbought by the Market and return will be significantly reduced or out of stocks.
In another word, for better return, higher risk is expected, and chance of losing your invested capital is real, and can happen unexpectedly.
Think of risks before profit.
1) How much I could lose without hurting me financially, if not to reduce the investing capital to the level that is not hurting.
2) For smaller capital, one could take higher risk as one could have not much difficulty in restoring the lost capital through more aggressive saving or reduced expenses to rebuild the investing capital to resume investing. Investing is a marathon, once started, no matter how, one have to stay invested; otherwise, there is no chance to recover those losses through return on safe financial instrument like fixed deposits. For bigger capital, one will have to take lesser risk approach and diversify the risks, it will be harder and take longer time to rebuild capital back to this level again. Read more…