Wednesday, November 5, 2008

Invest with money you can afford to lose... Really?

Sometimes I just wonder... Why do people keep saying invest with money you can afford to lose?

To me, I would see it as: invest with money you do not need in the near term (~5 years).

You see, when we approach with the mindset that we are investing with money we can afford to lose, we are already preparing ourselves to lose the money. Think about it... Is that really investing? Let us look at Warren Buffet's rules.

Rules of Warren Buffet
Rule Number 1: Do not lose money
Rule Number 2: Do not forget rule number 1

I would suggest that we approach monetary investments, not with the idea that this is money we can afford to lose, but rather, money that we can afford not to use in the near future. The thinking, the mindset, is different between these two. To me, there's no money I can afford to lose in the stock market; there's only money I do not need to use in the near future. But of course, this doesn't mean you will not lose money in the stock market.

Afterall, small-timers like me dabble in monetary investments to make money, not lose money.

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