Can you invest with less risk?

Is it possible to invest without running the risk of your investment losing value? Unfortunately not. There’s no such thing as risk-free investing. Investing always involves risks: you could lose all or part of your investment. There are, however, ways to limit the risk. So how do you do that? Here are 6 tips to limit investment risks.
Make sure you’re well prepared
Before you get started with investing, it’s always a good idea to think about the following three starting points for investment.
- What is my investment goal?
This could be money for your children’s education, capital growth or a retirement pension. - How much time do I have to reach that goal?
Think ahead to the future: 5, 10, 20 or maybe even 30 years from now. - How much risk am I willing and able to run?
Depending on your personal situation, you can choose a low-risk, high-risk or medium-risk investment strategy.
Do your homework. Make sure you choose the type of investment that’s right for you. At the end of the day, what matters most is that you feel comfortable with the choice you make.
- What is my investment goal?
Only invest money you can spare
Only invest money you don’t need. Make sure you always have a healthy buffer in your current or savings account for unforeseen expenses. The Dutch National Institute for Family Finance Information (Nibud) has created a handy buffer calculator that lets you work out what would be a good financial buffer for you.
If this shows that your financial buffer still leaves you extra money that you don’t need in the short term, investing may be an interesting option for you.
Spread your investments
Spreading your investments ensures that the value develops more evenly, with less-extreme highs and lows.
- Avoid buying everything in one go
Buy investments at different times over one or multiple periods. This allows you to buy investments at different prices. - Spread your investments over different investment products
Buy a diverse range of investment products, such as shares, bonds or funds, so you’re less vulnerable to concentration risk. Concentration risk is the risk you run when you only invest in one or a few investment products. - Invest in different industries
Buy investments from different industries. If you only invest in IT companies, for example, you will be vulnerable to losses whenever the IT sector hits a rough patch. - Look across the border
Buy investments from different countries and continents to reduce the risk when one particular country or continent is doing less well economically.
- Avoid buying everything in one go
Choose periodic investing
Periodic investing is a way of investing automatically, for example €100 per month, in an investment fund or a selection of ETFs. This means that you sometimes pay more for your investment, and sometimes less, so the prices average out and you are less sensitive to stock market fluctuations in the long run.
As you’re constantly adding to investments automatically, your total invested capital grows and the process takes care of itself. However, it’s still sensible to keep a close eye on how your portfolio is developing.
Keep it simple
Futures, call and put options, hedge funds, swaps. The investment world is brimming with complicated terms and complex products. Limit your investment risks by only investing in products you understand. You can get started with investing without complex products, such as by using ABN AMRO’s Guided Investing service. If you have over €100,000 in savings, you could let the experts at Portfolio Management take care of everything for you.
Read on to learn more about investing, but remember to keep things simple.
Give your investments time
One of the biggest challenges for any investor is to keep a cool head. How would you react if the stock markets drop and your investments suddenly lose value? Your instinct might be to sell right away.
But if you don’t need the money and can afford to wait a bit longer, you might be able to avoid losing money by selling too soon. Experience shows that stock markets rise in the long run. So the longer you invest for, the greater the chance that the highs will compensate for the lows.
Find out more about investment risks
There are risks associated with investing. You could lose all or part of your initial investment. Read more about the main investment risks and how it works.