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The Reality of Investment Risk: Solutions to Avoid It

By Nicolas Moore | July 26, 2022

When you invest your money, some risks occur regardless of the opportunity you choose to pursue.

Investing your money can help you turn a considerable profit but will bring more risk because of the higher potential of gaining more money. While there are always risks associated with investing, there are different strategies you can employ to try and alleviate some of the risks you take. There are so many investment opportunities available to you that you can figure out where the risk is and which ones will work best for your money.

Investment risk is real, but you can work to avoid some of it and turn your investment into a significant profit.

Why Are Investments Risky?

Investments always carry a risk for you as the investor because your money can be lost anytime it is funding something.

Investments are risky because when you give money to a business owner or an individual, there is no guarantee that you will get your money back. It becomes hard to know if you can trust your investment and if you will profit from it in the long term. With new ideas constantly popping up, it is hard to tell if they will last or if they will take your investment and fold quickly.

Also, the market is constantly changing since investment values go up and down often, so you could gain a lot of profit and lose a lot in short periods. You might lose some money in the short term, but investments are usually most profitable in the long term. If you are getting into short-term investments, there is a higher chance for risk because many need time to grow into the profit you want. When you wait for longer, you take some risk out of the equation and get more money back when it matters.

Sometimes, investments just do not work out because they are a scam or someone does not manage the money properly. The most significant risk you always take is an investment not being legitimate and losing a large portion of your money. Losing your money like this is not super common, but it can happen if you do not research and learn about the company properly.

Periodically, the people that receive your investment may not know how to manage money properly and not be able to pay you back as you intended. Unfortunately, this happens to many people and creates more risk when investing.

Even though investments are risky, there are always opportunities to invest your money that are safer and will not make you lose it all.

Be Realistic About the Risk

While it might be difficult, you have to acknowledge the reality of the risk that comes with investing.

Investing your money has the potential to make you a lot of profit, but you will always have to be willing to take risks. Taking higher risks comes with better rewards, forcing you to decide how much money you should invest. When you invest more money, you will take more risks than if you invest small amounts. If that fact sounds discouraging, unfortunately, it is one that every investor has to accept.

The biggest mistake any investor can make is thinking that the money they invest is guaranteed to perform well. Part of receiving your reward is accepting the risk that your money will not grow as large as you once hoped. While being hopeful about any investment is necessary, it is critical to acknowledge the risk and know that anything is possible.

Also, being honest about the risk of investing will help keep you in check for the duration of your investment. If there is no risk, many people may invest their entire life savings to try and make the most of it. While risk might worry you, it also plays a role in the success of your investment when you take it all into account. That is because when you have a lot of money hanging in the balance, you are likely to make more effort toward your investment and take some risk out of the entire situation.

How To Avoid Risk

With the different risks out there, you have many opportunities to avoid them with the investments you choose to pursue.

The first thing you want to do when evaluating the risk you might take is to research the investment you are considering. Researching may sound like the obvious thing to do when you invest, but many people get excited about a new opportunity and forget to do so.

If you are investing in a company, researching who they are to see how they have performed in the past is a good idea because it can help you determine how they might perform moving forward. Putting in the research for your investment opportunities might be the difference between taking on more or less risk.

Another thing you can do to avoid risk is to diversify your investment portfolio, keeping multiple investments separate. Often, when people lose their investment money, it can be attributed to them putting it all in one place rather than spreading it out. If everything is getting invested in one business, you will lose everything if they file for bankruptcy or do not manage it correctly.

When you spread your investment out amongst other opportunities, you will only take a little loss if one of those ventures does not work out. That way, you only lose some money and not everything you are putting in.

One more thing to take some risk out of investing is to find less volatile opportunities that carry less chance of you losing money. When you do that, you can worry less about losing your money and know that it is in a much safer place where you will receive a nice profit from it. With all the other low-risk investment options and diversifying your portfolio, you can take a lot of the risk out of the entire investing process.

There are always options to take some risk out of your investment so you can make more money with the money you already have.

Low-Risk Investments

Along with taking less risk with your investments, there are investment opportunities with less trouble.

Mutual Funds

A standard low-risk investment opportunity people take advantage of is mutual funds.

They are accounts that invest your money in the stock market but in low-risk ways that are much more reliable than traditional stock trading. In a mutual fund, your investment is in one place where it gets invested in different stocks and bonds that grow your money. They are not quite as lucrative as traditional stock market investing, but they will make you money on a long-term basis with a much lower risk.

When you invest in mutual funds, you can still make money while knowing you are taking a much lower risk than if you invested it in a different opportunity. You can also diversify your portfolio by investing in multiple mutual funds, making more profit in the long term for your investment.

If you want an investment that will make you money fast, mutual funds are not the ones to pick. Furthermore, they are low-risk but meant for a long-term investment that takes time to create success.

Peer-to-Peer Lending

Another investment option that you have an opportunity to take advantage of is peer-to-peer lending

Microloan investing might sound new to you, but it has been an investment and borrowing option since 2005. If you invest in microloans, you can turn a nice profit at the end of the term. Microloan investing is possible with as low as $100, and you can set the terms for the borrower to pay you back so you can profit from your investments as you expect them. 

Using peer-to-peer lending apps like Lendee, you can efficiently diversify your portfolio by investing in multiple small loans to minimize risks and maximize growth opportunities. Each microloan is different, allowing you to set the fees and length of term, which is how you get to choose how much profit you can make. 

While microloan investing can help you profit or make a lot of money, they are not as low-risk as some other investment options. However, the great thing about microloan investing is that you can choose who you lend the money, so you control how much risk you want to take. 

Peer-to-peer lending is also excellent for short-term investing, helping you make money faster while keeping it at a lower risk than some more traditional ways. 

Invest In Microloans Today!

If you are looking for your next investment opportunity, you can start investing in microloans using Lendee! 

It is a peer-to-peer lending app that allows you to find different borrowers who need your investment. With Lendee, you can sign up, fill your account’s wallet, and start investing in any opportunity that you see fit. 

The great thing about Lendee is that borrowers receive a Lendee score that will help them determine what kind of borrower they are. Based on their score and what they need their loan for, you can decide if you want to invest in them and if you think their cause is worth it. Also, you can set the fees and profit more if the risk is higher, leaving the decision in your hands.

Head over to the Lendee website or download the mobile app to sign up and get started!