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Why do I invest in stocks when a total loss is possible?

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The total loss is the worst nightmare of the small and large investor. It is not just the destruction of capital that hurts. The many hours of wasted analysis also leave their mark.

A total loss does not have to be homemade. Because even the best investment thesis can fail. Either by stupid coincidences or by absolutely unforeseeable events.

Therefore, critics of the stock market are right to ask why one should invest in stocks when there is a risk of total loss at any time. It’s all just casino!

The magic word is: expected value. If that’s high enough, I’ll take any risk. Also total loss.

Once the reputation is ruined…

You can make a lot of money with stocks. Or just lose it all. Every child knows it.

The stock price is like the reputation that everyone has to lose. It takes years to reach a certain level. But only a few minutes to completely disassemble it.

There are many reasons for a total loss in stocks. The business model is rarely solely responsible. Much more often, greedy managers take the wheel at the wrong time.

Anyone who is not an informant only recognizes the fraud when it is already too late. As a result, most investors face a total loss at any time, even with the best stocks.

The ETF investor is an avoider

Non-insiders take the ETF for good reason. Exchange traded funds also have their weaknesses. But a total loss is almost impossible.

The price is an average market return of 7% per year. But is this really a good deal?

For those who want to avoid a total loss at all costs, there is probably no better deal. But not all investors desperately avoid.

There are also those with ambitious goals. With return expectations that no ETF in the world can meet.

A total loss can be part of an absolutely rational calculation

Strange but true: a 100% loss can be perfectly acceptable. As long as there is a 1000% return on the other side of the equation.

ETF investors choose mediocrity to escape total loss. But that’s not my style at all.

If I invest time, energy and money in something, only at the highest level. Of course, this doesn’t always work the way I imagine it to. Especially not in the short term.

Because the biggest goals are always the ones that involve the most imagination. Electronic commerce? clouds? electric mobility? In my opinion, these are the great ideas of yesterday.

Real future industries always have a total loss leg. The associated expected value of 1,000% and above is exactly what I’m looking for.

The article Why I Invest in Stocks When You Can Totally Lose Your Money first appeared in The Motley Fool Germany.

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Motley Fool Germany 2022

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