There is one golden rule of investing that you should always
follow: Never invest money you cannot afford to lose. Investing is
not saving. The difference between saving and investing has been explained before but
the short version is that saving is money you put aside that is kept in cash
that you can access in a few days or less for emergency needs. In contrast,
investing be it in stocks or Options Trading or in forex is the process of putting your money to work making even more money
for you.
If you always remember this and never violate it, you shouldn't
have to worry about eating cat food during your retirement. But there is a
natural human tendency to want to overreach, to put more money in than you can
afford, and go for a huge payout. In fact, this trait tends to be magnified the
more desperate someone is for money because they hope that hitting the jackpot
will make all of their problems go away (you see a lot of people below the
poverty line playing the lottery but not very many executives).
You cannot just view your "portfolio" as the stocks you
own. It encompasses so much more - your emergency cash reserves, your insurance
coverage, your fully funded retirement accounts, your real estate holdings, and
even your professional skills that determine the income you earn in the job
market.
It never fails to amaze me that the same folks who spend weeks
studying Consumer Reports ratings for a new stove or washer and dryer would put
all of their savings into a stock or other investment they don't understand. It
just doesn't make any sense. Your first goal is to avoid major losses. Don't
get greedy. Be patient. Seek the advice of qualified, well-regarded advisers.
Keep your costs low. The recipe may not seem exciting, but it has proven to
work for generations.
