REPOST: How to invest without losing money

Is it really possible to invest in something and not face the risk of losing money? This article on USA Today tries to explain how this may be attainable:

When it comes to returns, time is your friend.

When it comes to investing, realize that risk and reward tend to move in opposite directions. If you take more risks, you run a larger chance of losing your money, but you often have a higher upside.

It’s possible to invest without losing money. In the current market, where interest rates are very low, any investment guaranteed to not lose money will have a very small return.

For most people thinking about investing, the goal is to minimize the potential for losses while maximizing how much you might make. Exactly how you do that — and where you put your money — depends a lot on what type of investor you are, and what your goals are.

There is no one answer

A 67-year-old looking to live off his or her investments has different needs from a 22-year-old planning to work about 45 or so years. In addition, someone with a lot of excess income has different needs from someone struggling to make ends meet.

Whether you’re starting small, even with a few dollars each week, you’ll want to have a diverse portfolio. That means owning not only stocks, but also bonds, cash, and even alternatives such as shares in a real estate investment trust (REIT).

Even within your stock portfolio, you’ll want to diversify. That means owning shares of companies in multiple industries, as well as shares in operations of multiple sizes. By not having all your eggs in one basket, you give yourself protection against outside forces. For example, an event that hurts oil stocks — perhaps a breakthrough in electric-car technology — may benefit shares in parts of the technology sector.

How to be safe

The safest way to invest without losing money is buying cash equivalents. Money markets, Treasuries, certificates of deposit (CDs), and corporate bonds offer generally stable returns with very limited risk, and in some cases no risk at all. The problem is that safety comes with a price.

CDs, to examine one cash equivalent, constitute an agreement in which you give your money to a financial institution for a period of time in exchange for a set interest rate. Perhaps you will receive 2% for a 12-month CD and slightly more for longer periods. These are safe investments, but they also have no upside beyond whatever interest rate you’re being paid.

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