I came across this advice multiple times during my investment journey and I am also guilty of dishing out the same to many over the years. As I grow along my investment journey, I realize that “Only Invest in what you can afford to lose…” is actually not a very good investment advice. Here are the reasons why.
- “Only invest what you can afford to lose” tend to create a mindset that Investing is like gambling. Since the money is something that they can afford to lose, people will tend to take more risk in their investment. They will be more willing to “invest” based on news/tips and are less inclined to put in effort to research on the companies they are investing in, treating their investment like a gamble.
- Investing in what you can afford to lose also tends to limit the amount one is willing to invest. Generally what people can afford to lose is only a small