A few months ago, a friend of mine experienced something which she shared with me later. She was offered a supposed investment opportunity which they said would give her double of her investment in just 1 month. It looked so good to her that all she was concerned about was just to make gains, without even considering what she could lose. She did not ask herself where the returns was going to come from, and how it was possible to make an R.O.I of 100% in just 1 month. She was just beclouded by the quest for gains. So she invested. After about 3 weeks, the business rugged away with people's money. She did not consider the risks involved before she invested, so she became a victim of wrong investment. While investing, the fundamental rule you should observe is risk awareness.
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Safe investment goes way beyond just putting money into a business and expecting returns. It actually begins with the understanding of the risks involved. Before you begin to think about what you stand to gain, the returns, profits, etc, you first need to think about what you stand to lose. This is the foundation of creating a successful business that will be sustained. This is what makes investment not to be a gamble, and it makes the future more certain. During the fundamental analysis you make while setting up a business, you also need to put risk awareness into consideration. Even as a crypto trader for example, there is a kind of coin you would want to trade and you will put in extra measures like stop-loss, because of some uncertainties. This is because you are aware of the risks involved. Without risk awareness, a little wrong step in business could lead to free fall.
You will be surprised how a lot of people are driven by excitement, pressure from friends, fear of missing out, or by emotions when making investments. Some others enter because of the quest for fast profits. But what they fail to understand is that every investment that you want to undertake, no matter how it may look and how promising it is, it will definitely carry a level of risk. Safe investment does not mean that you are completely avoiding the risk, but you are recognising the risks, measuring and analysing it, then managing it wisely. If you ignore risks, you may expose yourself to loses which could have easily been avoided.
A very important aspect of risk awareness is to know the difference between high-risk investment and low-risk investment. High-risk investment may carry potentially high returns, but so does it also come with higher probability of losing your money. For a low-risk investment, it may grow slowly, but it usually comes with more stability, with a better safety of your capital. As a safe investor, you need to understand your personal financial limits, then go with the investment that will align with it, and also align with your income level, responsibility, and with your long-term goals. You should also know that what is safe for one investor may be unsafe for another investor, so go with what aligns with you.
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Another aspect of risk awareness that we need to take a look at is to understand how investment actually works. There are people who have lost money, not because the business was not legit, but because they know nothing about the business that they invested in. Before committing your funds, you need to ask yourself a couple of questions, then undertake a lot of researches and studies, so as to gain a fuller understanding of what you are committing your money into. Knowledge has a way of reducing uncertainties. The more you know, the better you will be at your financial and investment decisions.
The last aspect of risk awareness that we will look at here is diversification. Putting all your assets and money in just one business may expose you to unnecessary danger. If you spread the investment across many sectors, even if you incur losses in one, it will balance up by the gains from another one. Even though it may not completely eliminate risks, but it can actually reduce the impact of unexpected events.
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