Investing can be a rewarding and positive experience, but following the principles of responsible investing is key to reducing the potential negatives associated with financial speculation.
Don’t invest more money than you can afford to lose
This is the “Golden Rule” of investing for a good reason. Anything you invest in always has the potential to become worthless. For this reason, never invest more than you can afford to lose: you never know when you might need money in a pinch.
Shorting, while especially attractive in bear markets, can be a risky strategy. Shorting yields profits when prices decline, and losses when prices rise. As there is no limit on how high prices can go, the loss potential from shorting is unlimited. Always manage your risk carefully when shorting.
Unregulated brokers and exchanges
Unlicensed trading platforms can be attractive as they do not require you to adhere to KYC (Know Your Customer) protocols, amongst other things. However, we must remind you that your interactions with such brokers and exchanges are not regulated by financial authorities, and as such we recommend that you stick to reputable, licensed, and regulated companies.
Mental health issues, debt, and precarious finances are just a few of the potential effects of irresponsible investing. Do not put too much of your or your family’s money at risk, and seek help if you are in financial or mental difficulty.
Here are some resources that expand on some of the aforementioned issues.
Money Advice Trust — Debt advice
Which? Investment Risk Guide — A guide to investment risks
Investopedia Shorting Guide — Information about shorting
Mind — A guide to seeking help for mental health issues