LemonTrades
TL;DR
- Start with the worst case: how far has this kind of investment fallen before? The S&P 500 fell 57% in 2007–09, and bitcoin 77% in 2021–22.
- Then match it to you: when you need the money, how much of your savings it is, and whether you could hold on through a fall like that.
- Watch for borrowed money, things you can’t sell quickly, and anyone promising a guaranteed return.
- LemonTrades tells you what moved your investments, and why, as it happens, so a big drop never comes out of nowhere.
Most people ask how much an investment could make. The better first question is how much it could lose, and what you’d do if it did.
The seven questions
- How far has it fallen before? Look up its worst drop, not its average year.
- When will I need this money? Money needed within a few years shouldn’t be in anything that can halve.
- How much of my savings is it? One stock or coin should be a small slice, so a collapse doesn’t sink you.
- Can I sell it quickly at a fair price? Property, private deals and small coins can be hard to sell in a panic.
- Is there borrowed money? Margin, leveraged funds and CFDs can lose more than you put in.
- Do I understand how it makes money? Profits, interest, rent, or only someone paying more later?
- Who is selling it, and how are they paid? Commissions and fees can push people toward worse products.
How far common investments have fallen
| Investment | Worst fall | When | Back to the old high |
|---|---|---|---|
| S&P 500 | About −57% | 2007 to 2009 | 2013 |
| Nasdaq Composite | About −78% | 2000 to 2002 | 2015 |
| Gold | About −70% | 1980 to 1999 | 2008 |
| Long-term Treasury bonds | About −50% | 2020 to 2023 | Not yet |
| Bitcoin | About −77% | 2021 to 2022 | 2024 |
| Nvidia | About −66% | 2021 to 2022 | 2023 |
Approximate price falls from peak to low, before dividends and inflation. Even “safe” assets can drop a long way: long-term government bonds lost about half their value when interest rates jumped.
The kinds of risk
| Risk | What it means | How to cut it |
|---|---|---|
| Market | Everything falls together | Time, and a mix of investments |
| Concentration | One holding collapses | Spread your money out |
| Inflation | Your money buys less | Own things that grow, not only cash |
| Interest rate | Bond prices fall when rates rise | Shorter bonds |
| Liquidity | You can’t sell when you need to | Keep an emergency fund in cash |
| Leverage | Losses bigger than your money | Avoid borrowing to invest |
| Fraud | It was never real | Check who you’re dealing with |
Red flags
- A guaranteed or unusually high return with little risk.
- Pressure to act now, or to keep it secret.
- Payment in crypto, gift cards or a wire to a person.
- A seller or adviser you can’t find on FINRA’s BrokerCheck or the SEC’s adviser database.
Ready to start? See how to start investing money. Is the market expensive? See is the stock market overvalued. Thinking about trading instead? Read is day trading worth it.
Sources
- Investor.gov: Assessing your risk tolerance
- Investor.gov: Asset allocation
- FINRA BrokerCheck
- Investor.gov: Introduction to investing
Education, not financial advice. All investing involves risk, including the loss of your money. See our disclaimer.
