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Anant Gupta

"Youngsters should take high risk bets when investing." Why this is not always the right advice



Conventional wisdom I often see is that those who are young should take high risk investments in the stock market because they can afford to lose money at this young age, but if their investments succeed, they will have great payoffs. Now, I am not anti-risk. You should take risk in business, careers etc. Go ahead. But:


Learn what risk is

Not my words, but when it comes to investing, most new investors don't know what risk is. They are attracted to the market for quick money, thinking they will get rich quick. Be it stocks, crypto, futures or options. I often see young naïve people come into the market thinking they are smarter than professionals and can "time" things. And yeah, sure, the average retail investor can outperform professionals, but not when they don't fully understand the game. You don't want to take investment risks for the sake of taking investment risks. You want to take risk because you understand what you can lose and what you are buying *actually* has potential.


The myth of getting rich in markets

I see so many examples of this: Someone lost their entire life savings into an investment because they thought it was gonna go only up. They run out of cash. Worse, they may have borrowed the money from family or friends. A lot of these people were struggling to make ends meet, had low income, but still gambled away in hopes that they could get a better life. I don't blame them, but their hopes are pinned on the wrong horse. The stock market is for wealth preservation, only few can get rich by luck or immense skill of math and intuition. Most of us don't have that. You need better income streams. If you are in debt or have low income, don't go out and take risky investments. Focus on preservation.

At the risk of sounding like a broken record:

If you are new, learn what you can lose, not what you can gain. That is the biggest risk, to lose your cash. Even if you want to take high risk trades, invest only small amounts at first. Dip your toes into the water for a few months and see how it plays out. How right have you been proving? How is everybody else doing? Is this your skill? Luck? Does this make sense? Can you take short term losses?


Repeating the same thing

You don't want to go all in and lose money. Then you will never return. Take time to educate yourself a bit. Then start investing because that is the best way to learn. Just, please don't go all in on something. Don't listen to those who tell you not to diversify. They can afford to lose money investing, most of us can't. Others may not have your best interests at heart. Take risks elsewhere where you don't put your own family and savings in jeopardy.


Good luck.

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