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Use this method to manage your investment risk when you buy shares

by , 09 April 2013

“When you first decide to start investing in shares it's exciting. When shares go up, as an investor, there's no better feeling. It's better than any thrill-ride. But no matter how exciting the ride, you can also lose everything you've invested,” warns Chief Investment Strategist for Red Hot Penny Shares Francois Joubert. But don't worry! There's a smart way to minimise losses. Read on to discover what it is…

Perhaps the harsh reality of being an investor is, while you may make significant gains today, the shares you’ve bought with your hard earned cash can go down as well. You might lose a little. Or you might lose a lot.

But, you can minimise losses by managing your investment risk.

And it’s a lot easier than you may think…

Use this method to manage your investment risk

Never underestimate the simple method of doing your own research. Chances are you wouldn’t buy a car just because your friend said it was a good buy.

You’d look into it first, compare it to others in the market. The price, the fuel consumption and safety. You’d even take it for a test drive. It’s all part of doing your research before you commit your hard-earned cash.

Well, it’s the same with buying shares.

“Don’t just buy shares because of a rumour you’ve heard or something you’ve read on an Internet message board. The most important thing you can do before you buy a single share in any company is to do your own research into that company,” advises Joubert.

The more you understand exactly what you’re investing in, the better informed your investment decisions will be.

“If you’re still not sure after doing your own research, you may want to run the idea by your financial planner or an investment professional as well. Having a second or a third opinion on an investment idea gives you more perspectives to compare with your own,” adds Joubert.

It’s important to keep in mind that this risk management method won’t eliminate the risk of losing money when you invest. “But if you own shares, having a clear idea about how to manage your risk will make you a better, more educated, and hopefully a more profitable investor,” says Joubert.

Use this method to manage your investment risk when you buy shares
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