The Most Important Rule of Investing: Only Invest What You Can Afford To Lose
If you always remember the “never invest money that you can’t afford to lose” rule and never violate it, you shouldn’t have to worry about eating cat food during your retirement or if something potentially catastrophic occurs like job loss or illness. Worse than investing before you’ve established savings is the prospect of investing money, you need to meet other responsibilities, which can be catastrophic.
There’s a natural human tendency to want to overreach, to put in more money than you can afford and go for a huge payout and that brass ring. This trait tends to become magnified; the more desperate someone is for money. He harbors the hope that hitting the jackpot will make all his problems go away. Many people below the poverty line are playing the lottery, but not many executives drop their money on tickets.