Risk Management

Risk.  In life it really is inevitable, so we best accept it and learn how to minimise it.  Investing can be a good method of making yourself more comfortable taking risks in broader life, and is good practice to help you understand potential costs and benefits of decisions.  Trading can be very daunting, but keeping these three simple precautions in mind will help you manage your risk when investing in volatile markets:

1.    Only invest what you can afford to lose .  

Higher investments can mean higher potential returns, but it also means you have more to lose if things don’t go to plan and so its vital to ensure that you're still financially stable should things go south.

2.    Only take calculated risks.  

This will turn you from a gambler into an investor.  Research your potential investments and their markets or get advice from someone else who does.  Make sure understand all your potential outcomes when making a decision, and ask yourself if the potential payoff is worth the possible costs.  

3.    Manage your FOMO. 

As easy as it is to just throw your money into rising stocks, be patient and find out why they are rising and if/when they are expected to come crashing back down before you start moving any money around.  The same goes if one of your investments is deteriorating in profit.  Understand it can be normal for markets to make small adjustments that don’t always require a reaction before you immediately pull your money out.  Many people fall into a trap of trading with a form of inherent emotion desperate for something to happen rather than trading strategically.

Remember the words of Warren Buffet: “The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient”.  

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