How do investors lose money?

Not everyone makes money in the financial markets, only a few will make it and the rest are just on the losing side. They lose money through the firms they invest in and through banks.

Mostly banks can build and sell properties to investors at zero deposit and agree on monthly installments for a certain period of time, let’s say 50 years. The Banks know very well that no one will be able to meet their financial obligations but they still go on and complete the deal.

After that the bank then will go to the investment banks and sell those properties, it’s like they will sell the debts to the investment banks and the debtors will have to make the payments to the investment banks. The investment banks know very well that there are higher chances of making a loss in this type of investment so they will have to act in advance.

What will they do?

Rating agents will be hired to rearranges these debts as investment options for investors to buy let’s say they are grouped as AAA, AAB, ABB and BBB with AAA as the best package followed by AAB the list goes on. The idea will be to rate these from good to the bad and given a specific name like CDOs and they are mixed e.g. AAA considered to be the best package will be mixed with the bad ones.

After all the process is done, all these will be then sold to the public and investors will obviously go for the ones being labels as the best, and the investment will obviously know that this is where they will recover their losses.

So the small banks will sell these investment to larger banks and those larger banks will absorb the loss knowing very well that they will pass it to the investors and at the end the investors will lose. They try by all means to use investments jargons that ordinary investors can’t even understand and then they victimize them in the process.

How to avoid the losses?

Let’s say someone is selling products and some of those products are not durable and the buyer asks are they durable what do you think the seller will say? If he or she says no they are not it’s obvious he will never make it in the business so he will have to lie so that he gets more customers.

This happens with the banks and investment firms, never ever go asking advise from them on which investment package to make as they will mislead you, that’s when they will recommend worthless stocks and assets so better do your own research and make your own choice.

Conclusion

In this Era we are in banks and investment firms are not to be trusted and they make more and get richer when we lose money that’s why people are now going for crypto currencies as they will do their own research and invest on their own. Don’t fall prey to them and find you own path.