Any time you make an investment, there's a chance you may lose money. This can happen from bad investment performance, your investment company going bankrupt, or outright fraud. When you lose money in an investment, you might be able to recover it, but it depends on why your investment went sour.
Investments are a balance between risk and return. Risky investments like stocks pay a much higher return than bank accounts. Unfortunately, these investments can also tank big-time. If you lose money from bad investment performance, you should reevaluate your current strategy. Were your losses from bad choices or were they from a market downturn? Stocks in general may sometimes lose money during a short period but make up the losses plus much more over the long run. If you think your investment choices are still sound, don't panic and wait for the market downturn to end. Your stocks should eventually rebound and recover your lost money.
You can also lose money if your bank or investment firm goes bankrupt. The Federal Deposit Insurance Commissioner (FDIC) protects regular bank accounts. If your bank goes bankrupt, the FDIC insures up to $250,000 of your bank deposits. Contact the FDIC to reclaim your lost money. The government also insures brokerage accounts with the U.S. Securities Investor Protection Corporation (SIPC). This agency insures covers you for up to $500,000 of funds lost to bankruptcy. Note that the SIPC only protects against your firm going bankrupt, not against your regular losses in the stock market. Unless you get an adrenaline rush from living dangerously, make sure your bank or brokerage are covered by FDIC or SIPC.
Inappropriate Financial Advice
Financial advisers like insurance agents and stockbrokers have a legal obligation to serve there clients properly. They are not allowed to recommend products that don't fit your situation. For example, a stockbroker should not recommend risky stocks to a retiree who cannot afford to lose money. If you lost money because you were misled into buying inappropriate investments, you can file a complaint with the Securities and Exchange Commission (SEC) or FINRA, the Financial Industry Regulatory Authority. If these agencies agree with your claim, you may get your money back and your adviser may lose his license. Once again, this only applies against misleading or improper advice. If you ask for risky stocks and you lose money, you're out of luck and can't file a claim.
Illegal Investment Schemes
Investors also lose money from outright fraud. Criminals set up illegal investment schemes, like Ponzi schemes, to steal money from investors. If you lost money from a fraudulent investment, you should contact a financial attorney. She will review your case and determine what options you have to recover money. You may be able to reclaim money from the criminals or the government may create a fund to return your money. Each situation is different and a financial lawyer helps you find the best solution.
- John Foxx/Stockbyte/Getty Images
- How Does the 10 Percent 401(k) Tax Penalty Work?
- Investing Money as a Shareholder
- Does Decluttering Help Sell a Home?
- 5 Things You Should Know About Your 401(k)
- How Can I Invest Money Quickly?
- How to Invest Your Money for the Future
- How to Invest Money at a Young Age
- Differences Between an Expected Rate of Return & a Required Rate of Return
- How do I Invest Large Amounts of Money?
- The Tax Liability on Taking Money Out of an Investment