Can you lose money from an investment?

Because of the way stocks are traded, investors can lose quite a bit of money if they don't understand how fluctuations in stock prices affect their equity. In the simplest sense, investors buy shares at a certain price and can then sell them for capital gains. However, if the decline in investor interest and the fall in the perceived value of the shares result in a drastic fall in the stock price, the investor will not make any profit. Because all investments have costs, it can seem like a waste of time to worry about them.

Or maybe you assume that a higher price means higher quality. All investments involve a certain degree of risk. If you intend to buy securities, such as stocks, bonds, or mutual funds, it's important to understand before investing that you could lose some or all of your money. Unlike deposits in FDIC-insured banks and NCUA-insured credit unions, the money you invest in securities is generally not insured.

You could lose your capital, which is the amount you have invested. That's true even if you buy your investments through a bank. A margin account is another type of brokerage account that allows you to borrow money to buy securities, using your account as collateral. Through the investment strategy known as the “average cost in dollars”, you can protect yourself from the risk of investing all your money at the wrong time by following a consistent pattern of adding new money to your investment over an extended period of time.

Because credit institutions could not obtain any reimbursement from investors, many banks had to file for bankruptcy. If you have a financial goal with a long time horizon, you're likely to make more money by investing carefully in riskier asset categories, such as stocks or bonds, rather than restricting your investments to lower-risk assets, such as cash equivalents. Your broker will also charge you interest for borrowing money, which will affect the total return on your investment. Investors who use cash accounts cannot lose more than they invest in stocks, although they can lose their entire investment.

For the vast majority of those who are starting to learn how to invest money, a cash account is probably their best option. If you owe money on high-interest credit cards, the smart thing to do under any market condition is to pay the balance in full as soon as possible. And while you can build wealth by investing in stocks, you may never make money and you may also lose money. Another way an investor can lose large amounts of money in a stock market crash is by buying on a margin.

However, diversification will mitigate the risk of losing all the money you've invested and give your account time to grow and mature in the long term. But if you know the facts about saving and investing and go ahead with a smart plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money. Keep your money working: In most cases, a work plan is the most effective way to save for retirement. While you can't lose more than you invest with a cash account, you can lose more than you invest with a margin account.

The investment products and services provided by Stash Investments LLC, not by Stride Bank, are not insured by the FDIC, are not guaranteed by the bank, and may lose value.

Aurélie Van De Segers
Aurélie Van De Segers

Lifelong baconaholic. Lifelong travelaholic. Lifelong internetaholic. Incurable bacon geek. Evil bacon specialist. Infuriatingly humble pop culture fanatic.