The other day, I saw a question listed on the internet about why it was it was so hard for us as humans to accept the risk of an investment. This question is one that I believe is highly subjective, which is why I’ve decided to put my own spin on the answer. Investments, by nature, are risky. No matter how hard we try to rid ourselves of the risk associated with these things, we will never succeed. The key to investing is understanding the risks associated with the investment and limiting them; an idea that will be discussed more in-depth throughout this guide.
Investments are risky
Investments are risky; this is so important
that I have to say it 2x. We try to rid ourselves of the risk, but it will always be there. Think about it, college while it may seem like a sure-fire thing, is a risk-filled investment. A job, while it may seem like a sure-fire thing, is a risky, risky investment. That’s just how it works. Understanding this idea and seeing your investment for the risky things that they are, will definitely rid you of some of the fear of investments.
Try to envision the risks
When trading, one of the key things that I keep seeing repeated over and over again is that, to avoid the pain during the trade, it’s best to envision the losses. Envisioning the loss, allows you to brace yourself for the impact if you will. The pain from taking the loss loses power and you live to fight another day (another benefit of this is that you are able to cut your losses much easier when you understand that the trade that you are in may lose you a great deal of money).
Minimize the possible losses
If you limit the amount of money that you are willing to lose, you honestly have no choice but to accept it. This is one of the most important things that trading has taught me. One very simple way to do this is to simply restrict the amount of money that you put into the investment. For me, depending on the trade, I will put in less or more of my account.
Learn from it
Look, if you made a bad investment too bad. Shit happens. At least (if you cut your losses), you lived to make more trades in the future. A practical way to do this is to journal every single one of your “investments” down. Study that journal every so often to see if you can find the similarities in the good investments and the bad investments. i.e. how were you feeling at the time? What was the investment in? Any partners? Etc.
We make decisions that have either favorable or unfavorable outcomes. There may be a few variations between the 2 but for the most part, this is how things work. Understanding that there is a possibility of loss is just how you play the game. We can’t beat ourselves up over these things because this is life. It’s a game of chance. One that we must work hard every day to understand and accept. This is honestly a part of the game that I’ve been working every day to really accept.