INVESTING in the stock market can be a daunting journey, especially when initial attempts result in losses. Many, like my parents, faced significant financial setbacks that discouraged them from continuing. Similarly, when I first ventured into investing in 2008, I experienced a 40-percent loss due to the global financial crisis. Unlike my parents, who opted out of further investments, I chose to learn from my mistakes, educate myself and reenter the market with a more informed approach.
My parents and some of my dad’s friends were initially drawn to the stock market, investing significant amounts in IPOs (initial public offerings). Unfortunately, they lost a substantial portion of their investments, which not only impacted their finances but also diminished their willingness to learn more and continue investing.
I faced a similar situation when I made my first investment in 2008, having just learned about mutual funds from a financial forum. I invested P30,000.00 in a mutual fund from a reputable financial services company. However, when the global financial crisis hit a few months later, my investment lost 40 percent of its value. As a first-time investor, I panicked and, despite knowing it was a paper loss, decided to stop investing.
While my parents and I encountered similar setbacks, we differed in how we responded. My parents stopped investing altogether, while I took about a year to overcome the trauma of losing my investment. During this time, I educated myself by reading articles about different investment instruments and how they could benefit me. A year after the crisis, I resumed making regular investments.
Just like any other endeavor in life, losing money can be part of the investing process. The key, however, is not how many times you fail but how willing you are to learn and push yourself closer to success. If you’ve started investing and lost money, here are some tips to help you move forward and continue investing:
Learn why you are losing money. My losses were due to the financial crisis, and I had to learn about such crises the hard way. Various factors can cause investments to lose value, commonly known as risks. Assess the reasons behind your losses and look for safety nets to prevent similar outcomes in the future. Remember, investments are not guaranteed; generally, the higher the potential return, the higher the risk.
Reassess the investment instruments that fit your profile. Many first-time investors dive into the stock market based on tips from others without proper study, leading to prolonged “paper losses.” Stock market investing requires extensive research and analysis, which can be time-consuming. Not all investment profiles suit this type of instrument. Explore other options and determine which ones align best with your risk tolerance and financial goals.
Consult a financial planner. Many people hesitate to consult a financial planner out of fear of being pushed into purchasing a financial product. However, independent financial planners can help you understand your investment options and provide advice on how to recover from losses. Ideally, financial planners should discuss your goals to ensure that their advice and actions align with your objectives.
Create an investment plan. Just as you would create a business plan when starting a business, you should develop an investment plan before investing. An investment plan guides you in selecting the right investment instruments to achieve your goals and strategizing how to manage the risks associated with your chosen investments. Your plan can include diversification strategies, profit preservation tactics and loss-cutting measures.
Every investor, even the successful ones, experiences wins and losses. What sets them apart is how they handle their losses and continue moving forward. Losing money in investments can be painful, but, just like in life, every experience shapes us into better versions of ourselves and brings us closer to our goals. The only true failure is giving up.
When I reflect on my investment journey, I realize that the lessons I learned from my initial losses were invaluable. Those early setbacks taught me the importance of resilience, continuous learning and the need to remain calm in the face of adversity. If I had allowed my initial failures to dictate my future decisions, I would have missed out on the opportunities that eventually led to my financial growth.
Jeremy Jessley Tan is registered financial planner of RFP Philippines. To learn more about financial planning, attend the 109th batch of RFP program. To reserve, pls email at [email protected].
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