Myth #2: investing is too risky

Investing isn’t a gamble; it’s a smart way to build your wealth.

 

Have you ever thought that investing is a high-stakes gamble only for people who can afford to lose it all? If so, you’re not alone. But here’s the truth: that’s a myth that stops many people from building long-term wealth.

Investing isn’t about making wild bets; it’s about having a confident plan to grow your money over time.

 

Misconceptions about risk

The biggest misunderstanding is that risk means you will lose money. In reality, risk refers to how much an investment’s value might go up and down.

A high-risk investment has the potential for big wins, but also for big dips. A low-risk investment is potentially more stable but may not grow as quickly.

The goal of a smart investor isn’t to get rid of risk completely, but to understand and manage it.

 

How to manage risk

A great tool for managing risk is called diversification. This just means that you’re spreading your money across different investments – like stocks, bonds, and real estate – rather than putting it all into one. It’s the investing version of ‘don’t put all your eggs in one basket’.

By doing this you help protect yourself from the poor performance of any single investment. This ensures your financial future isn’t tied to the fate of just one company or sector. There are funds you can invest in that will do this automatically for you.

Another key to taming risk is focusing on the long term. The daily changes in the market can be stressful, but they rarely matter over decades. Historically, markets have always recovered from downturns, rewarding patient investors who don’t panic and sell. By staying invested through the tough times, you can give your money a better chance to grow.

The most important thing to remember when investing – is that you have complete control over how much risk you take on. Ultimately, investing is a smart, strategic way to take charge of your financial future.

That’s it for this myth-buster. Top up your account today. Or if you’re not investing yet, a Stocks & Shares ISA is a popular account with existing Moneybox investors.

 

Capital at risk. The value of your investments can go down as well as up, and you may get back less than you invest. All investing should be long term. Tax treatment depends on individual circumstances and may be subject to change in the future.