Why it is Necessary to Expect Losses When Investing

If there is one thing that many modern investors will tell you, it is to expect some losses under the current market conditions. This is not just a lackadaisical way to look at investing, however, because it is quite realistic and wise. Is this a really a good way to go about investing? Actually, it is extremely practical and can be put to good use when planning the portfolio.

How is that? Well, let’s assume that almost every investing activity that you do has a mental note connected to it that says “what would I do if this investment turns into a loss?” With this in mind, you are going to be able to make choices about other investing activities that might help to offset such a potential loss.

Need an example? One of the most basic things about investing is that total loss is usually a necessary risk. This applies to almost every single vehicle (with the exception of bullion quality coins), but if you assume that an investment might turn into a loss, you can make an acquisition that can help the portfolio to stabilize should such a moment arrive.

So, let’s say that you purchase some stocks that are expected to yield a certain percentage over the next two to three years. If you also say that this investing vehicle is at risk for total loss, you can then make a subsequent purchase of bonds or commodities which can help to offset the loss over a five to seven year period.

Yes, investing with loss in mind is going to extend the time frame or schedule, but it does incorporate a system for recovery, and this is one of the savviest ways to design any investing plans. We all know that patience is seen as a virtue, but if you use patience and cleverness when investing, you will see impressive results.