Tips to Protect Yourself When Investing

Investing is generally viewed as a sensible course of action. Something to help manage your wealth and protect your financial position for the future. The right investments can see you make a healthy return and help keep you financially secure. That said, no investment is completely risk-free, especially if you are investing in higher-risk entities such as certain stocks or cryptocurrencies. To help minimize your risk and keep your investments safe, here are some tips to consider when investing your money. 

Diversify Your Portfolio

Diversification is the first piece of advice you will be given when investing your money. Diversifying your investments is crucial when it comes to protecting your financial position and the logic is quite simple. You do not want to put all of your eggs in one basket. The risk is, that if the one investment you have made takes a bad turn and you see all of your assets or wealth deplete with that bad investment, leaving you with nothing. If however, you have split your wealth over multiple different investment streams you will be protected if one of those streams does not reap the reward you were hoping for, as your other investments will hopefully remain intact. 

Ways in which you might seek to diversify your portfolio could include investing in a wide-ranging variety of outlets from stocks and shares, commodities, cryptocurrency, property, and even wines. 

Don’t Always Go High-Risk High-Reward

When it comes to investing the level of risk and reward can often be split into three categories. Low risk, medium risk, and high risk. Of course, each category has a corresponding reward rate. It may be tempting to opt for the high-risk transactions to capitalize on a maximum benefit but as part of your diversification be sure to spread your investment over all three categories. In fact, many investors will advise you to focus on the low and medium risk categories. 

Do Your Research 

If you are investing your money you must carry out the appropriate amount of due diligence before parting with any cash. Lack of understanding is in itself a risk factor for your investment portfolio. If for example, you are investing in property, be sure that you have fully researched the property market and, of course, the property you intend to purchase. You want to be confident that there is not likely to be any unwelcome surprises and that there is in fact a potential for growth and revenue return. 

If you are investing in cryptocurrency for the first time ensure that you understand the terminology and how it works. Also, ensure you have researched every avenue. You don’t just have to jump straight into Bitcoin when there could be more suitable alternatives for fledgling cryptocurrency traders. A great way to ease yourself into the world of crypto is to take advantage of tokens such as Stablecoins. To help you further you will need to ask what are Stablecoins and how do they work?  As with most things crypto this can be a long answer but essentially, stablecoins are designed to evade the high and low-value fluctuations that you commonly see in cryptocurrency. Perfect for novice users. 

When it comes to research you also need to be confident that you have researched your potential tax liability should your investments come to fruition. 

Think Long Term

As a general rule, you are likely to see a larger return on your investments over a longer time period. If you can, tie up your investment for say ten years as opposed to one year, you could be looking at an increased return of tens of thousands, if not hundreds of thousands. Over time the value of your investment will grow, as does the amount of profit you are making so it stands to reason that the longer you leave your investment in situ the more you stand to profit. 

Be Mindful of Investment Scams

If you are looking to a third party for investment advice, again, be sure to do your due diligence on any intermediary you use and be mindful of any potential scams. A great way to do this is to consider the following; 

  • Do not be rushed into making a decision, a common fraudulent tactic is to pressure investors into making quick decisions without taking the opportunity to research the investment. 
  • There is always a risk, so if you are being told that there is zero risk in that investment, view it with extreme caution. There is always a risk, even if it is minimal. 
  • If it seems too good to be true, then it probably is. 

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