6 Effective and Proven Ways to Lose All Your Money

Introduction

• People make a lot of financial errors but some are ultra dangerous.
• Remember: You can lose all your money.
• In the worst cases you can lose more than the initial amount was.
• Frauds exist at least for 2,000 years.
• Even so, criminals always find new victims, losers. Don’t be one of them.

People are chasing often the best investments, but make fatal errors in other areas. Many of us never admit: “I lost my money”, we are ashamed and conceal what we have done. But knowing the worst investments can be important to avoid losses and finding adequate assets. Read this list.

1. Lost More than I Had with Margin Call

Perhaps the most dangerous investments are leveraged products with the possibility of a margin call. Like currency (foreign exchange or FX), commodity or stock market futures, options selling, CFD-s. With these, you can bet on the price of a currency, commodity product, stock or value of a stock index. Leverage means the value of your investment will change by a multiplier. For example, let’s suppose your leverage is tenfold. If the price of the underlying product moves five percent, the value of your investment may increase or fall by 50 percent.

But not only the price moves are very strong in this industry. The most dangerous part is, you can lose more than you invested. The prices sometimes move too quickly and too strong in the wrong direction. Sometimes you can’t liquidate (terminate, close) your investment position fast enough. So, your money puffer will be consumed entirely.

Chart: The way to 800 index points from 4,900 (approximately). The Nasdaq 100 technology stocks index in 2000-2003. (Source: Tradingview.com.)

In this case, you receive the “margin call”. You have to pay your loss, even if it is bigger than your initial funds. You need to replenish your deposit, refill the money you paid earlier to cover your losses. In extreme cases, like a fast stock market crash, you can get into heavy debt and lose all your fortune. Even your house or your car.

By some types of these high-risk trades, the vast majority of investors lose all their money. Some statistics claim 70-80 percent of them lose. Other sources claim even 90-95 percent is possible. (See the references below.) This all happens also in normal cases when the brokerage firm or other service provider is completely honest and plain with you. But there are also a lot of bad, fraudulent actors in the market. Most of them can be recognized by “get-rich-quick” offers.

Fraud. Beware of get-rich-quick investment schemes that promise significant returns with minimal risk through forex trading. The SEC and CFTC have brought actions alleging fraud in cases involving forex investment programs. (Source: The US authority SEC)

2. Lost All with Ponzi Schemes

Ponzi schemes are special frauds based on any fake investment which doesn’t exist in reality. A very effective and simple way to lose all your money.

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(Photos if not indicated otherwise: Pixabay.com)

Disclaimer

I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research, or consult your advisors before making any investment or financial or legal decisions.