Legal Guide

How to Take Action as an Investor Dealing with Investment Loss

"So, I lost money. Now what?"

The new year is approaching fast, and like many investors who made some wrong choices in 2021, you may be wondering how to move on after suffering an investment loss. There's no question; it's tough when you've lost money on any of your investments. You may be tempted to pull out your investments, sell them for a fraction of the price you paid, and run away. But this won't solve your problems or fix your losses.

It's normal to feel scared about what might happen next, but if you want the best outcome for yourself as an investor dealing with investment loss, you need to stay calm and take action before it's too late. Here's how to do it.

Take a moment to review your investments and current financial situation

Doing this means taking a look at your portfolio and seeing where you stand in terms of your overall finances, which is an important step in moving forward. Are you in a stable position? Or are you in a tough spot right now? Did you lose a lot of money? Did you gain or break even? Are you in the black right now, financially speaking?

If your portfolio looks stable, take action. If not, consider talking with a trustworthy advisor about what happened and where you stand today. The last thing you want to do is make things worse by making decisions when you're in a tough financial spot. A good financial advisor will be able to give you advice based on your financial situation, and can help you get back on track if you're behind.

Make a plan for what's next

After taking stock of your finances, it's time to take control of the situation by making a short-term plan that will help you take control of your finances again. What are you going to do about the investments that didn't work out? Are you going to sell them, or hold onto them for now? Will you still contribute regularly? How will your financial plan change moving forward?

Remember, it's okay if some of these questions don't have clear answers right away. All you need is a short-term plan that will help you take action in three to six months. If you do this, by the end of these three to six months you should have a clear idea about what your next steps are going to be.

Find out whether your investment loss is reversible

If you're dealing with a short-term investment loss, it may be possible to turn things around and get your initial investments back. If you've only lost money for a couple of months or weeks, then there's still time to make up that ground and take action accordingly. On the other hand, if you've lost a significant amount of money and it's been a year or two, then your loss may be irreversible.

Most likely, there are some actions you can take to get out of this bad investment situation. It may require working with an experienced broker or professional advisor who has helped investors in similar situations.

Know the Difference Between Investment Loss and Investment Fraud

Though it's easy to get them confused, investment loss and investment fraud are two very different things. The former happens when investments do not perform as you expected them to. The latter is a type of financial crime in which someone, primarily an advisor or broker, uses their position in power to gain access to other people's money without disclosing the risks involved or giving away how your money will be used.

Investment fraud is illegal, so you may want to take action against an advisor or broker you suspect of committing this crime. Contact the right authorities and speak with a qualified legal professional about what happened to your money.

If you've lost money due to investment loss that wasn't due to investment fraud, you can file a complaint with the Securities & Exchange Commission (SEC). Here's a good guide on how to file your first SEC complaint.

In addition, you can also file a complaint against your advisor firm or brokerage firm with FINRA. Both FINRA and the SEC are government organizations that can help you, as an investor dealing with investment loss, get the outcome you deserve.

Take Action to Reduce Your Losses

In most cases, making a few changes in your investments will give you a chance at getting your initial investment back or reducing your losses in some way. For example, if you were using a high-risk strategy, try a low-risk approach instead. Or if you were relying on one stock or investment that went south, spread out your money across a variety of different investments and asset types.

Taking action as an investor dealing with investment loss will not only give you a chance at recovering some ground, it also gives you the opportunity to learn from the mistakes you made in the past. After all, if you learn from your mistakes, you can improve as an investor moving forward.

At the same time, stay on top of your current investments to ensure that nothing looks suspicious or fishy. If anything seems off, investigate it before it's too late and take action accordingly.

Make Better Investment Decisions in the Future

Regardless of how you handle your current investment loss, take steps to ensure that your future investment decisions give you a better chance at success. For example, look into ways to reduce the amount of money involved in each trade or set up automatic withdrawals to take advantage of dollar-cost averaging.

Look through your current financial situation and how it relates to your investments for potential problems. Do you pay high commissions or fees? Are you comfortable with your financial advisor or broker? Has the value of your investments taken a sharp turn for the worse in recent months?

If there's any room to improve, consider comparing your current situation against other options. For example, if you're looking for a new broker or financial advisor, do some research on what each has to offer, what their fees are like, and how they compare to other advisors or brokers.

When you decide to work with a new advisor or broker, it is advised to check out their history using the BrokerCheck by FINRA. This tool will be able to tell you if they've ever been involved in any sort of financial scandal. If they have, you should be wary of this person and consider working with someone else.

Moving On and Investing Again

After taking all of these measures, you can move on with investing in a more secure and confident way. Check back in on your investments from time to time and see how they're doing. As long as you take the right steps, you should have a positive experience with your investments going forward.

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