What to Do When Your Investments Tank

Wednesday, 27 Oct 2010 12:47 PM

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When you put your hard-earned money into investments, you expect to earn healthy returns. The return on your investments varies from moderate to excellent, depending on the type of investment. However, we often tend to forget the risks involved with almost all types of investments. There is always the risk of losing the money invested. As the saying goes, what goes up also comes down. If your investments follow the market on its way up, you will earn handsome returns. Similarly, if the market goes down, your investment will also tank.
 
Here are some tips on what to do when your investments fail:
  • Don’t panic, because whatever goes down eventually comes up at some point. If the market has gone down tanking your investment on its way down, chances are that it will eventually go up. You can also switch to other investments where there could be better growth potential.
  • Ask questions. This is the advice given by the U.S. market regulator Securities and Exchange Commission (SEC). Many investors who lost money could have avoided the situation had they asked basic questions from the start. It is never too late to ask questions and learn the basics. You should ask yourself, or preferably a professional financial planner, what went wrong with your investment, so that you do not repeat the same mistakes. If you are already investing under the guidance of a financial professional, you should check their background and credentials.
  • If you have lost money with investments that are in high-risk segments like stocks, you could consider diverting funds toward investments like bonds, which are less risky. Stock market investing is among the most attractive types of investment, but it also comes with a high degree of risk.
  • Before investing in property, do thorough background research. Traditionally, property investing has also been a favorite for high and steady returns. However, many investors have burnt their fingers in the recent meltdown that has seen property prices plummeting. Therefore, it is strongly advisable to follow advice from professionals.
  • Never put all your eggs in one basket. The best investment portfolio is spread across a variety of investment classes. This will lower your risk, making the returns steady in nature. Besides, you can consider hedging your risks from one investment with another investment.
  • Lastly, if you think that you have lost money not because of a bad investment decision, but because of financial fraud, take legal recourse. If you think your financial planner or advisor is the cause of your losses, you have the right to go to court. If you submit your case properly and with sufficient evidence, you might very well win back much more than your investment in the form of damages.

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