Owning money always bears risk of loss. Whether it’s stolen from your bag or you invest it and make a loss, a risk always exists. The more you rely on a single investment type (think, a single stock or cryptocurrency), the greater your risk of making losses. In this context, spreading risk through diversification is important. Simply put: you don't carry all your eggs in one basket. For example, if you invest €100 in just one company, you are taking a greater risk than if you invest €1 each across 100 different companies. If you invest in stock ETFs, for example, you automatically diversify your investment plan. Instead of investing in a single stock, you invest your money in an entire index. If the price of one of the stocks included in the ETF falls, it is less significant.

Also, beware of making overly emotional decisions. If the prices are all plummeting, you should not panic or sell your investments. Remember: you’re investing for the long term and can therefore sit out fluctuations. This type of investing is called buy and hold and has been proven to result in higher returns than trying to beat the markets by buying and selling your investments at what seems to be the best possible timing.

Did this answer your question?