How Should You Start Investing If You’re Afraid To Lose Money?

Investing of any type entails threat. Generally, the extra threat you tackle, the extra potential reward you may earn. Some investments, comparable to financial savings accounts and U.S. Treasury Bills, carry exceedingly low ranges of threat; however many others, together with shares, have average to excessive ranges of threat.

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Although each investor desires to earn the very best return attainable, many don’t have the chance tolerance to dabble in additional unstable investments. But, even in case you are risk-averse, you’ll need to make investments your cash in order that on the very least you may sustain with inflation and never lose the buying energy of your cash.

Here are some suggestions for taking your first steps so you can get invested even if you are afraid to lose money.

Use ‘Fake’ Money

One of the very best methods to study how investments work is to make use of “pretend” cash. Many web sites, together with some provided by brokerages, mean you can open dummy accounts and make investments without spending a dime utilizing simulated {dollars}.

The “worth” of your account will rise and fall in actual time based mostly on the investments you choose. By investing this manner, you will get the texture for the way markets and investments work with out risking any of your personal hard-earned {dollars}.

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Start Slow

If you’re risk-averse, think about taking child steps whenever you make your first investments. For instance, when you’ve got $10,000 that you just want to make investments, begin with simply $1,000, and even $500. This approach, you will get the texture for placing your cash in danger with out worrying about shedding your whole bankroll.

As you achieve extra confidence in your investing, you can begin including extra.

Begin With an S&P 500 Index Fund

An S&P 500 index fund tracks the return of its namesake index, which is usually used as a proxy for the general market. With corporations like Apple, Microsoft, Amazon, Berkshire Hathaway and Alphabet (previously Google) dominating the index, you understand you’ll be investing within the largest and most well-known corporations in America. 

Index funds can typically be purchased for zero fee and have low ongoing bills, making them an awesome low-cost approach to begin investing. No lower than the billionaire CEO of Berkshire Hathaway, the so-called “Oracle of Omaha” Warren Buffett, has repeatedly stated that low-cost index funds are the best choice for many buyers.


Diversification is without doubt one of the finest and best methods to scale back threat in your portfolio. Diversification refers to proudly owning a wide range of investments that don’t essentially transfer in tandem.

This not solely reduces the chance of proudly owning a single funding; it additionally reduces the general volatility of your portfolio as a few of your investments shall be transferring up whereas others may be taking place. Net-net, the volatility of your general portfolio shall be lowered, making for a smoother experience.

While a stable funding technique for all buyers, it’s notably necessary for individuals who are afraid to lose cash, as it could actually cut back the acute highs and lows of proudly owning a single funding.

Add Money Consistently

Regularly including cash to your account is a good way to easy out the ups and downs of your portfolio. When the market is down, you’ll be shopping for extra shares at low cost costs. When the market is up, you’ll be shopping for fewer shares when they’re costly.

This eliminates the chance that you’ll put your entire cash in proper on the high of the market, which is without doubt one of the largest fears of most risk-averse buyers. It additionally will be sure that you’ll be shopping for throughout occasions when the market is down, which is a good way to spice up returns over the long term.

Consider a Robo-Advisor

Robo-advisors handle your cash in accordance with a rules-based algorithm based mostly by yourself self-reported funding goals and threat tolerance. Your cash sometimes shall be unfold out over a spread of exchange-traded funds protecting various sectors of the market, from massive and small U.S.-based shares to worldwide shares and bonds.

Robo-advisor portfolios are designed to get the utmost return in your cash for the bottom attainable threat, tailor-made to your particular funding profile, and they’re rebalanced often. All of those providers sometimes price about 0.25% per yr, or simply $25 for each $10,000 you may have invested.

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This article initially appeared on How Should You Start Investing If You’re Afraid To Lose Money?

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.