Investing in stocks historically gives higher returns than placing money in bonds, GICs, or savings accounts. With higher return comes higher risk. Here I will talk about two risks that come with investing in stocks and how to reduce those risks.

1. Risk of capital loss

You can buy and sell stocks on major exchanges easily through your bank or through a trading platform. However, the flip side of this liquidity is that it’s also very easy to sell at a loss. Some people make better investors in real estate because it is less liquid, even though one usually needs to get a loan to buy a property because the investment is much bigger.

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  1. Although most people deep down know stocks give higher returns it is definitely true that these same people are willing to stick with GICs and savings accounts because they are less risky.

    And it doesnt help that banks lure them to stick around with low interest promotions.

  2. Most people i know invest based on what others are doing. The best advice is to learn how the system works first.

  3. Savings accounts get a bad rap. They arent all that bad. As long as you look to banks that are not the standard brick/mortar types then you’ll be fine. banks like credit unions and other online firms offer very good rates.

  4. Hey you gotta risk a little to get a lot back. Name of the game.

  5. The biggest risk is panicing and selling too quickly. I remember back when i was 22 and buying and then selling my stock way too quickly (within a few months span). Only to find out a month later the stocks rose to record highs? *sigh* πŸ™

  6. Thats why dividend stocks exist. Sure there price dont change much but that is the point. You get back reliable returns on time without concern of prices going up or down.

  7. But there were only two risks listed. πŸ™ I can think of other ways to reduce risk which it didnt cover — how about diversifying your holdings? It allows one to weather the storm.

  8. What i cant figure out is why people take the risk in the first place when there are countless other paths one can take? Real estate is a good alternative. The article hints at it but doesn’t explore it. Investing options are out there that fits anyones tastes.

  9. Volatility will always be baked into any holdings you jump into. The trick is not to panic at the first sign of a downturn. End of story.

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