However good you are at picking investments, you will have one that fails every now and then. It is impossible to go through life picking all the right investments and never tripping up. If you could do that, you’d make a fortune making recommendations for everyone else!
If you’re relatively new to investing, it makes sense to be realistic in what you can achieve. To this end, here are three things you should do if you trip up with an investment and end up losing money.
1: don’t panic
Yes, it might be the first thing you think of doing, but it’s worth hanging fire before you do. Firstly, as we’ve touched on above, it pays to be realistic. However many investments you have, it’s logical one or two of them won’t turn out the way you’d hoped. This is part of the reason why we don’t put all our eggs into the one proverbial basket.
Take a fresh look at the situation once you’ve calmed down – it may not be as bad as you think. You might be able to minimize the damage or at least decide whether to exit the investment or whether to wait it out to see if it improves.
2: look at why it has failed
If your investment really has turned up its toes and died on you, find out why. In terms of stocks and shares, it could be you’ve bought and/or sold at the wrong time. The only way your failed investment will be a total failure is if you don’t learn from it to prevent the same thing happening again in the future.
For example, let’s say you have lost $1,000 on some shares. By looking at them more closely, you can see you sold at the wrong time. If you had paid attention to the latest news reports and guidance and hung onto them for another week, you’d have minimized your losses, even if you hadn’t made a profit.
3: consider the implications for the future
This really follows on from the point I made above. Let’s look at the failed shares example again. You have two thoughts to consider here. Will you chalk it up to experience and not worry about buying shares again, or will you learn from the experience and use that knowledge to assist you in future purchases?
The decision is yours of course, and it is a very personal one. Some people will be put off by the experience, whereas others will resolve to do better next time so they can choose more appropriate investments with more knowledge.
Whatever path you decide to travel down, you can see how following these three steps will be useful in every case. The more you know and understand about your investments and your approach to them, the easier it will be to minimize the failures you have. These three steps could even make it easier to achieve bigger and better successes in the future.