ôô

8 Tips to Invest Without Too Much Risk

Get 8 investment tips to help you build wealth even if you hate risk.

By
Laura Adams, MBA
5-minute read
Episode #208

Even though stocks can really turbo charge your investment returns, you can keep a lid on your risk by owning a broad range of investments—that’s called diversification. You can buy shares of funds that own real estate, bonds, and commodities, in addition to stocks, so you manage risk by spreading it out among multiple investments. That way, if one investment is a loser, you have other winners to count on.

Investment Tip #3: Consider Why You May be Risk-averse

According to a recent article in Money Magazine, the number of people under age 35 who are willing to put their money at risk has declined. It’s no longer the case that young people are more risk-tolerant than older people! The article reasons that young people who just started investing have only experienced turbulent financial markets, and therefore are soured by the idea of investing and keep most of their money in cash. It seems like Jenny, who is 28-years-old with $100,000 in the bank, may fall under this category. It’s important to remember that taking financial risks, including losing money on paper in the short-term, may be required to meet your long-term financial goals.

Investment Tip #4: Remember that Time Is Your Friend

A big part of making money grow is to take advantage of time. Twenty-somethings might shy away from investing these days, but they’re actually the most suited to own relatively risky investments like stocks. That’s because young people have lots of time to recover from market setbacks. The longer your time horizon, the less market risk is a factor. So if you’re waiting for significant signs of market stability or for the Dow to hit 14,000 before you start investing, that could be very costly. The longer you wait to invest, the more growth you miss. That’s because time is the secret sauce that allows your money to multiply, due to the long-term effects of compounding interest.

Investment Tip #5: Realize that Not Investing Is Risky

If you still don’t feel comfortable about investing your money, remember that keeping it in the bank by default is risky too. The reality is that we’ll probably need more money for retirement than we think because we’re living longer and will probably have reduced Social Security benefits in the future. I mentioned inflation earlier; if it gets out-of-hand, investing in stocks may be the only way to accumulate enough money to last as long as you live. 

Pages

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.