I've come to realise that in the business of life, when all is said and done, investing is the the surest path to wealth creation. Working can only take you so far down the road and time is in limited supply.
An important domain on financial growth is investment. Which can be defined as the science and art of strategically allocating financial resources with the goal of generating returns. Or to preserve and grow wealth. That's the basic premise of it.
But investing is not without risks and pitfalls. Some of which we never get to see beforehand. While others are easily recognizable when we have the eyes for it.
Market Volatility, Fraud Or Poor Decision-Making?
Market Volatility
For the longest time that I can remember, I disliked volatility. I saw no benefit in it and my brain couldn't fully wrap around why it happens. Why can't the market be stable like the ground?
Newbie investors hardly factor in market volatility when investing. And rightly so because they have little to no experience. However, amateurs and veterans also find themselves caught in this pitfall.
It's very respectable to flow with the volatility. But I think a good alternative is simply to hedge against downside risk. This adds a layer of protection to one's investment portfolio. I'm always with the believe that it is important to have a good cashflow whether the market is up or down.
Employing a good strategy for hedging will mostly depend on how well you can diversify. Perhaps, creative Diversification?
Fraud
Fraud is the main thing that we hardly get to notice beforehand. Seemingly legitimate scams have multiplied in the investment world so much so that it has become very hard to differentiate the real and not real. Occasionally, the real can turn into not real. Integrity is a rare quality these days.
For me, the best remedy for fraud prevention is the popular adage in the crypto world of Doing Your Own Research. Nothing should be taken at face value. We should work to discover what's underneath the surface.
Poor Decision-Making
Without experience, poor decision-making is a given. You simply can't make a decent cake without experience or having a recipe. And even if you have a recipe it might take awhile before you make a good cake.
Having a recipe simply helps refine that investment decision-making from poor to good and beyond. Because now you have a formula or strategy to work on and iterate upon.
And a sure-fire way to acquire a recipe(s) is through education in its many forms. You see, experience can't neccesarily be bought but it can be peeked into from those who've already walked the path.
From experience, the main risk with poor decision making is constant financial losses and missed opportunities on potential gains.
In Closing
The financial implications of investment losses on market volatility can range from mild to severe depending on effect of the volatility.
For fraud, it's just severe because in most cases funds are unrecoverable. Poor decision-making is somewhere in between the two mentioned above.
At the end of the day, risk is plainly unavoidable. But we can definitely come up with ways to mitigate it.
Thanks for reading!! Share your thoughts below on the comments.