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Can I invest risk-free?

Step 3

Investing means taking risk. In fact, it is precisely because you’re taking risk that you have a chance of returns. It is good, therefore, to learn a bit more about the risk involved. We’ve said it before and we’ll say it again: you could lose all or part of your initial investment.

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There is no such thing as 100% risk-free investing. Luckily, there are ways to limit the risk that any investor can use, regardless of whether you are a beginner or a seasoned investor.

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Know what you’re investing in

It may seem obvious, but only put your money into investments you understand. Even when investing in high-profile companies or funds. It will take the mystery out of sudden drops and hikes, and help you keep a cool head. This way, you will not succumb to impulse buying and panic selling. There are also complex investments that carry additional risk. If you invest in those without knowing exactly what you’re investing in, you may end up with more extreme losses.

It is also very important to understand all the fees and charges. What fees are charged when you buy or sell? And don’t forget about the service fees you pay your bank or broker, and the fees that may be attached to an investment product. These fees may have a great bearing on the potential returns.

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Don’t buy everything at the same time

It can be very tempting to wait to buy until the price has dropped to a low point. But when is that? Since no one can predict share prices, it’s best to buy your investments at different times. Spreading investments in this way will ensure more even value development, with less extreme highs and lows. The price you paid will then be more of an average, i.e. not low, but not too high either. Periodic investing is a good way to do this. This is when you automatically put a certain amount into an investment fund every month or every quarter. You can invest small amounts on a regular basis that way.

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Spread your risk over multiple investment vehicles

If you put all your money into one or a few investments, you may expose yourself to greater risk. It is better to buy various investment vehicles, such as shares, bonds, or funds. Make sure you also spread them out over different industries. If you invest only in tech companies, for example, you will be vulnerable to losses whenever the tech industry hits a rough patch. For an even better spread, you can buy investments from different countries and even continents.

Good to know: ETFs and investment funds offer an easy way to spread your money over different investment categories, companies, and countries.

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Yesterday’s returns are not the same as tomorrow’s

Share prices from the past few years are not enough to go by in making your investment decisions. This is why they often say, ‘"Past performance is no guarantee of future results.’ Equally important are market conditions, geopolitical developments, and the economic outlook, which are all factors that impact companies big and small. And they are yet another reason to spread your investments well.

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Give your investments time

One of the biggest challenges for any investor is to keep a cool head. There will always be times when stock markets drop and your investments lose value. Or times when some prices soar but your investments lag behind. Think of investing as a marathon and that the finish line is nowhere near in sight. You’re better off sticking to your chosen strategy. Only, it's a good idea to scale down your risk at the end of the investment term, so no final sprint to the finish line.

Learn more about starting with investing ...

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2. What type of investor am I?

Let’s take a look at you. What are you like when it comes to money? Are you patient enough? What would be a better fit for you, active investing or passive investing? And how do you deal with risk?

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Investing for beginners

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4. How do I set my strategy?

When you invest for the long term, it’s a good idea to set yourself some rules. Read more about setting yourself a goal, your budget, and your risk. And don’t forget about the fees!

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Investing involves risks

Investing involves risks. You could lose (some of) the money you invested. If you are going to invest, it is important that you are aware of this. Invest with money you can spare. Read more about the risks associated with investments.