Avoiding Common Investment Mistakes: Investing can be an excellent way to increase your wealth, but it also involves managing a level of risk. There is an appeal to risky behavior that millions of people find too alluring to ignore. Just look at the popularity of extreme sports; participants know they could face serious injury or even death, but they balance this against the pleasure and sense of achievement they get from the experience. Even if you don’t want to climb a mountain or throw yourself out of a plane, you might still enjoy the odd thrill in your life, so how do you balance the pleasure of taking risks with your money against the possibility of losing more than you can afford?

Risky Investments

The standard advice for investors is to play the long game; put your money into stocks, shares, and other investments that will give you a reasonable return over an extended period of time, with a low rate of risk. This is sensible advice and a very sound way to get a return on your money. However, it does lack the thrill of buying shares at a low price and seeing your money quadruple (or more) in a matter of hours or even minutes if you get it right. Trading in higher risk investments could bring very high rewards, or it could mean your money is gone in an instant. If you find the idea of this level of risk-taking exciting, check out the most volatile stocks Nasdaq has listed for some serious thrills. Before you consider these kinds of investments, you do need to calculate how much you can reasonably afford to lose. That’s the only way to incorporate a level of risk without taking a chance on losing it all. The key is to understand how to calculate the risk and stay in control.

Take good advice and develop your skills

It’s tempting to see if you can play the investment game by following your own hunches and trying to work out where to make a killing on the stock market. The added thrill of knowing you chose the investments yourself can make the experience even more enjoyable, as you will not only have made money, but done it using your own judgment. Realistically, you’re not likely to do as well on your own as you would if you sought the advice of an experienced broker. If you want to dabble yourself, you need to learn more about the way the market works and understand the processes involved before risking your money. The best way to do this is to practice – record the returns on investments you would have liked to make, and only start making real investments when you have a good success rate.

The level of risk you’re prepared to take will be down to you as an individual, and how you view the possible outcomes. There is no way of insuring yourself against financial problems if you take extreme risks, so keep your investments within your means and take advice from the experts; at least until you have evidence that your judgment is sound.

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