Invest what you can afford to lose

in LeoFinancelast year (edited)

After Funmi a colleague from work lost almost all her investment in the crypto space, I knew I had to make some changes. Funmi was a crypto newbie and she started investing early last year when almost all coins were attaining their all-time high. Of course, this moon period was where millions were made and lost but in Funmi's case, she lost almost all as the first price correction took place.

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The concept of investment is quite different based on what you are planning to invest in. While some investments are quite risky with high returns (For example; cryptocurrency), some yield low but steady returns (For example; government bonds and real estate), knowing how to navigate between this class is vital, especially if one is to really make profit in the space.

In funmi's case, she made two errors while investing. The first was that she failed to properly get educated on how the crypto space works and this, in turn, hindered her from knowing some basic crypto trading concepts. for example, buying a coin that just hits a new all-time high could be quite risky as big bag holders might decide to dump their bags at the realization of their targets. These are basic tips that newbies hardly know as they expect the coin bagged to keep mooning forever. Although, we all wished for that, but in the real sense, it is achievable and unrealizable.

The second mistake she made was that she failed to properly categorize the kind of investment she is going into. That means that she fails to attest to the fact that cryptocurrency investment is a very risky investment (In which one could lose everything overnight or become wealthy overnight). Had it been that she has known the risk attached to crypto investment, she would have known better not to have invested all her funds at once. A proper portfolio management knowledge would have helped save the day but it was too late.



Inculcating a good portfolio management skill will assist one to get back on their feet faster after an initial crash either in a stock market or a crypto market. These skills are not that hard to learn but it takes time to perfect and patience to see the effect in full. It is also essential if one wants to hedge against loss, the portfolio management skill should be known.

So to the topic of the day "investing what you could afford to lose". is quite a popular slang in the crypto world. The meaning is literally as it is written and this helps save you some headache investing in the crypto space. The crypto market is unregulated and that has resulted in the creation of numerous tokens without proper background checks. some are rug pull projects while others will REKT (Both short run and long run).

It is quite unwise to invest all your savings and monthly income on a crypto project with the hope of taking X3 of your investment in a short period. This is not advisable regardless of how promising the coin/ projects appear to be. News affects the crypto market and you can never be too prepared for the outcome of negative news.



So when next you think of investing in crypto, Always ensure that you invest funds that you can afford to lose because you can actually lose all the capital invested in the real sense.

Thanks for reading, I will appreciate your contributions on the issue

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This is a wise advice, investing only what we can afford to lose is a way to avoid unnecessary financial losses that will hit our financial strategy, I agree a proper knowledge of risk management, will bring us closer to getting more hits than misses entries.

Best regards, be well.

unfortunately, not many see from this logic. i prefer investing after saving as that gives me something to fall back if things doesn't work out

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