In Part 1 of this series, I mentioned that no bank in their right mind would lend money for stock investments. This is simply because the probability of stocks losing much of their value or becoming worthless in a short amount of time is very high and very obvious.
Just look at the stock market right now and I’m sure you’ll find stocks that have lost much of their value in the past year alone. As you can see, the stock market is very volatile, and the change in a stock’s value can be very abrupt. Of course, it can go both ways, one may argue. How about real estate?
In contrast, real estate can be considered as a stable investment which is very unlikely to lose value as abruptly as stocks. Even if real estate does lose value, the depreciation is not that significant as compared to stocks. Again, it would also take a longer time to lose value.
Real estate can be insured
But what if a property gets destroyed in a fire, an earthquake, a landslide, or when an airplane comes crashing down on it, etc., the real estate investor would lose his investment right? Not unless the investor had it covered with insurance.
In fact, getting a property insured (acts of nature, mortgage redemption insurance, fire insurance, etc.) is often mandatory when taking out a loan through banks or other lending institutions like Pag-IBIG.
Is there insurance for stocks?
Is there an equivalent insurance that can cover a stock investment against stock market crashes, scandals, or from the global financial crisis? The answer is simply none, there is no such thing. If there is, please do let me know so I can have my stocks insured.
Moving forward, lets cover the main reason we invest, to get a significant return on our investment.
What if you have already invested in stocks or in real estate and notice that your investment is somewhat not giving you the expected returns or its market value is going down but you don’t want to sell just yet.
Is there anything you can do that can affect or raise the value or the returns of your stock or real estate investment? I will try to explain this in the next and final part of this series.
If you have an opinion, question, comment, or even a violent reaction that you would like to share, don’t be shy, just leave a comment.