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It’s hard to accomplish much in life if you’re not willing to take on a little bit of risk. Keeping all of your spare money in a bank account means that you’ll have plenty to fall back on if you ever have to deal with a difficult time. However, this also means that your cash will stay stagnant, never growing or working to help you achieve your goals. That’s why people often decide to take a little money out of their bank accounts and place it into their investment portfolio instead. When you invest, or even consider more active ways to build money, like a swing trading strategy, you open yourself up to the opportunity for financial growth. The question is, how much money can you reasonably afford to risk? Is it a good idea to push yourself out of your comfort zone, or do you want to hedge your bets? Here’s how to find out.
Figuring out Your Risk Level
Ultimately, there’s no one-size-fits-all strategy for making money, whether you’re looking at stocks, securities, forex, or something else entirely. Some people are naturally more cautious with their cash than others. This caution might come from previous experiences that the person has had, or it might just be a quirk of someone’s personality. No investment, no matter how great it seems, will ever be completely risk-free. You’re always going to be putting cash into something that you think will generate value, but there’s no guarantee. There’s always a risk that you can get back less than you put in. You might find that your returns fluctuate too. This is common.
Figuring out how much you’re willing to risk will also give you an insight into how much you can potentially earn. A small amount of risk is useful when you’re dipping your toes in the water and learning what works for you – but it won’t give you massive results overnight. On the other hand, bigger opportunities arise when you put more money on the line.
Always Start Out Small
Usually, the best option is to start small. Figure out how much cash you can afford to lose right now, and only risk that much. This will ensure that you don’t get yourself into any dangerous positions while you’re still learning and figuring out a strategy that works for you. If you’re particularly nervous, you can consider speaking to a financial advisor about your options and see what they have to say.
Speaking to a professional will give you an insight not just into how much you’d be comfortable spending, but whether you should be investing at all at this time in your life. If after a while of practicing, you decide that you’re willing to open the door to some new opportunities, there’s nothing stopping you from ramping up the amount you want to spend. Just remember, it’s always best to have some extra cash aside for emergencies before you begin investing. Make sure that you have an emergency savings account, and don’t spend any money you need to use on bills and essential expenses.
