Irrational risk investing and YOLO investing are defined as an investor’s pursuit of extremely high returns with extremely high risk, while ignoring risk control and long-term planning. This investment strategy can bring significant risks and losses to investors, which will not only ruin your finances but also affect your psychological health. This article will explain the risks and dangers of irrational risk of YOLO investing, and how to avoid this investment strategy.
The dangers of irrational risk YOLO investing
Lack of risk management
The danger of irrational risk of YOLO investing is the lack of risk management. Risk management is a very important part of the investment process, which can help investors control risk, reduce losses and ensure the long-term sustainability of investment. However, YOLO investors often ignore risk management because they focus on immediate high returns and are not willing to acknowledge the consequences of high risk.
They often adopt unreasonable investment strategies and ignore important risk management measures, such as stop loss and asset allocation. This approach leads them to frequently lose money under market volatility, which seriously affects their investment returns and psychological health. If investors cannot manage risk rationally, then irrational risk YOLO investing will bring them more risks and losses.
Lack of long-term planning
Besides the lack of risk management, irrational risk YOLO investments also suffer from a lack of long-term planning. Long-term planning means that investors consider future returns and risks in the investment process and take corresponding measures to achieve long-term financial goals. However, YOLO investors focus on immediate high returns without considering long-term investment planning. They adopt a short-sighted investment strategy, pursuing quick windfall profits and ignoring risks and future long-term returns.
This approach can lead investors to face financial risks and uncertainties in the future, as well as negatively impact their mental health. Therefore, reasonable long-term planning is very important, and only with a scientific long-term investment plan can investors achieve sustainable financial and psychological health.
Mental Health Issues
Besides financial risks, irrational risk YOLO investments can also have a negative impact on an investor’s psychological health. High-risk investments often trigger anxiety and nervousness in investors, and these negative emotions can impact their psychological health. In addition, YOLO investors are often susceptible to market sentiment, such as greed when the market is doing well and panic when the market is down.
Such emotional investment decisions can cause investors to make frequent mistakes and lead to investment failure. Investors should keep their sanity and avoid emotional investment decisions, and learn to control their emotions, reduce psychological stress, and maintain a healthy psychological state.
How to avoid irrational risk YOLO investment
Risk management
In order to avoid the irrational risk of YOLO investment, investors need to carry out effective risk management. First, investors need to understand their own risk tolerance and choose an investment strategy that suits them according to their investment objectives and risk tolerance. Second, investors should try to avoid high-risk investment strategies, such as leveraged trading and futures trading. If 200% leverage is used, then as long as the trade is down 50%, it will blow up. In using leveraged trading, I pursue a reasonable range of 120% ~ 140% or so for health, otherwise it is easy to burst the risk of positions.
In the investment process, investors should also set a stop loss to avoid excessive losses. The setting of the stop loss needs to be done on a case-by-case basis, and it is recommended that the stop loss line be set within the maximum loss that the investor can afford. In short, investors need to stay sensible, manage risk effectively and avoid using high-risk investment strategies to reduce investment risk and achieve their financial goals.
Long-term planning
Long-term planning is one key to investment success and requires developing a long-term investment plan and following it. The following are some useful suggestions:
How to make a long-term plan? First, the goals and time frame for investing need to be clearly defined. Second, asset allocation is required to determine the proportion of each asset class in the portfolio. Finally, make sure that the portfolio is continuously monitored and adjusted to ensure that it meets the investment objectives and risk tolerance.
How does asset allocation work? Asset allocation refers to the allocation of funds in a portfolio to different asset classes, such as stocks, bonds, real estate, etc. Asset allocation requires consideration of factors such as the investor’s risk tolerance, investment objectives and market environment. Usually, younger investors can adopt a more aggressive asset allocation strategy, while older investors need a more prudent strategy.
How can I control the risk of my investments? The risk of an investment can be controlled by proper asset allocation, diversification, and setting stop losses. Diversification can reduce the risk of individual investments, while setting a stop loss can automatically sell stocks when a certain percentage of losses are incurred to avoid further losses.
How to maintain mental health
Irrational risk YOLO investments often cause investors to lose control of their emotions, which can negatively affect investment decisions. To avoid this, investors need to pay attention to the following points. First, learn to control their emotions and remain calm and rational. Second, to prevent themselves from being influenced by market emotions and avoid blindly chasing the difficulties.
Finally, it is important to exercise self-restraint, follow investment plans and investment strategies, and not be swayed by their own impulses. Through these measures, investors can maintain their psychological health and reduce the negative effects of irrational risk of YOLO investments.
Conclusion
In this volatile market, many people will choose the YOLO investment strategy. Although this strategy can bring high returns, it is also accompanied by high risks. This article provides an in-depth analysis of the dangers of irrational risk of YOLO investing and how to avoid this investment strategy.
First, risk management is very important. Investors need to control the risk of their investments and set reasonable stop-loss and return targets.
Second, long-term planning is also important. Having a long-term plan can prevent investors from being affected by short-term market fluctuations and control their emotions.
Finally, it is also important to maintain mental health. Investors need to learn to control their emotions, prevent themselves from being influenced by market sentiment, and exercise self-restraint. Through these measures, investors can better avoid irrational risks and ensure their financial and psychological health.
