You Will Almost Never Lose “all” of Your Money by Investing
When you talk about investing your money in stocks or related investments , the doubt often arises: “But you can lose all your money overnight!” This myth is still terrifyingly widespread. In truth, it is nearly impossible to lose all your money, especially overnight, if you invest correctly.
As the personal finance blog The College Investor explains, there is a difference between “investing” and “trading.” A lot of investing fears come from people who actually think about day trading. Day trading involves making money buying and selling individual stocks and speculative ups and downs on a given day. On the other hand, investing means building a diversified portfolio and managing the overall growth of the market. While you can lose money on a day-to-day basis (and we’ll talk about how to “lose” funds per second), it is nearly impossible for your portfolio to drop to $ 0 as long as human civilization remains unchanged:
The first thing to know about investing is that you can lose money. It is so simple. You can invest today and see your portfolio fall tomorrow. But to lose everything? It’s really hard to do. During the worst stock market crash during the Great Depression, the stock market lost 89% of its value. During the last stock market crash in 2008-2009, the stock market lost 54% of its value from the top of the market to the bottom of the market.
In both cases, the stock market did not fall to zero. This means that if you were to invest in the general market, you would not have lost everything. In both cases, the stock market returned to pre-crash levels years later. Yes, a year later, but he bounced back. Both of these events (and almost all market events) occur over time. These huge falls did not happen overnight. Yes, it was about 10% or more days, but this return lasts about a year. This means that you could sell your positions and lose much less money.
When investing, of course, it’s important to remember that you don’t actually “lose” money until you sell something. If you owned a decently diversified portfolio before the 2008-2009 crash and kept the same portfolio today, you would not “lose” any money because you never sold your investment and made those losses real.
It takes an incredibly unlikely set of circumstances to lose “all” of your investment, unless you’re trying to get rich quick by outsmarting the market. With a decently diversified portfolio and the patience to ride out the days of the fall, it will take a terrible, world-threatening event that will make you lose everything. Investing can be difficult and intimidating, but in reality, not investing can be much more risky .
You Won’t Lose All Your Money By Investing (If You Use This Advice) | College investor