Can you afford to lose... financially?

Once you start playing in the high yield investment programs field, this is one advice you are definitely going to come across often:

Don't invest what you cannot afford to lose.

Good advice. I abide by it. Except I always find the exploration and explanation of this rule unclear or incomplete. Something is missing.

Exactly the reason I'm exploring this rule with you.

First, you must understand why we need the "don't invest what you cannot afford to lose" rule.

Simple. One single word:

Risk.

Surely you must know that there is risk involved investing in all these HYIP programs? If not, I seriously advise you to stop all your investment activities right now, and go read up all you can about HYIPs or go consult someone experienced in HYIP, like me. :-} :-P

Because you cannot be 100% sure what you read on the HYIP sites are true and that the HYIPs will keep their side of the bargain, the "don't-invest" rule is there to help protect you from losing "food" money.

Go to any financial consultant worth his salt. I bet you he'll tell you to take care of your basic survival needs like food, housing and transport before ever thinking of investment of any kind. Sound advice, right? When you need the cash to stay alive tomorrow, would you go spill it on an investment promising the sky 1 month down the road?

He won't stop there either. He'll then tell you to keep aside an emergency fund worth 3 - 6 months your average monthly expenses in case of... emergency, what else? You know, like out of job, sudden illness, etc. etc. Again, sound advice. Life is full of uncertainties so you must be prepared to some extent.

Do you know now "what you cannot afford to lose"?

That's right. They are the monies you need for survival and emergency. Don't use these funds for investment. Don't invest what you cannot afford to lose... financially. When you still have any money left over after all these, you can start accumulating those "what you can afford to lose" funds to play in the HYIPs.

And this is where many will stop when they explain the "don't invest what you cannot afford to lose" rule. In fact, many stop short of the emergency fund. Whichever it is, they normally just talk about the financial aspect of the rule.

But like I said from the start, I always find the explanation of this rule lacking in some ways. I personally consider at least one other aspect. Since I like to keep my blog short, I'll visit the rule next time.

For the time being, it's:

Don't invest what you cannot afford to lose... financially.

There you have it. For now.