How to Avoid Getting Into Financial Trouble

How to Avoid Getting Into Financial Trouble

As we earn, it is quite natural to aim at saving.  Multiplying money is a prudent act.  It would save us from many hardships in the future.  Savings would give us a financially independent retired life.  But in the process of investing, the risk is always present in some form.  In few options risk is low, in few it is very high.  Sticking oneself to risk-free investment would lead to low returns.  Use the below tips to invest in options involving moderate to high risk, still keeping your money safe:

  1. Avoid panic: When investing in high-profile stocks, it is quite natural to be afraid when the stock prices crush down.  But selling the stocks in panic at a dead low price will lead to havoc.  It will wipe off the entire investment.  Hence wait patiently till the prices improve.  Then you can sell.  Thus, you can avoid loss.
  2. Research: Pre-investment research is very important.  Analyze the risk involved.  While investing in bonds, know their ratings.  While investing in banks, find out the financial strength of the bank.  If you have slightest doubt that the bank might fail in the future, then avoid investing in such banks.
  3. Learn: Keep learning new technology. The future will be dominated by fintech products like bitcoin loophole.  If you do not learn new products like this trading software you would regret losing huge profit opportunities. Physical currency and card will be replaced by cryptos soon.  Learn them well in advance.
  4. Quit to stop-loss: If you know for sure that further waiting would lead to further loss only, better to quit.  Though this will not bring profit, it can at least save you from further loss.
  5. Spread: Spread your savings across different types of assets like gold, real estate, stocks, bank deposits etc.  If one crashes your remaining investment will be safe.
  6. Cut -off: Have a quota of investment.  If you are investing 1000 dollars in shares, keep a principle that you would invest at least 30% in the safest company only.  Depending on your age, income level, dependents etc. your risk appetite may vary.  But do not risk the entire 1000 dollars on highly volatile stocks.
  7. Re-investment: Have a principle that you would re-invest the profits again.  Do not spend them.  Spending out of investment is a bad financial virtue.  You can spend out of your income, not out of investment or profit generated out of the investment.