Over investing - is it possible?

Loss is just part of investing. However, one form of loss that is also avoidable is over investing. This is occurs when an investor puts more money into a particular asset than what the asset is actually worth in the market. As a result, the investor actually ends up losing money.

Is over investing ever a good idea?
In some instances, people over invest in what are referred to as a mixture of investment goods and consumption goods. For example, homes and cars are a type of investment good because the investor can resell that asset in the future. At the same time, they are also consumption goods because the owner can use the asset while he owns it, deriving a certain amount of use out of it. However, this consumption component is also what makes it an over investment. In the case of the car, for example, the value will only go down the longer the owner has it. But the owner is willing to do this, as he will get certain benefits from using the car. When this is the case, over investing is not necessarily a bad idea.

Other forms of over investing
There are other forms of over investing as well. The following are a few examples of how it is possible to over invest:

New businesses
It is also possible to over invest in new businesses, either the investor's own or someone else's. If the investor is the business owner, it can be risky because the investor is putting everything he or she owns into the business. If the business tanks, then so does the person's personal finances, which are all wrapped up into the business. In addition, if an investor puts all of his money in a business, then he or she has nowhere to go for money of their own until the business becomes profitable. One solution to this is getting small business loans to fund your business, or soliciting money from outside investors.

Stocks and bonds
It is also possible to over invest in stocks or other types of trading, particularly off shore trading. Foreign bonds and currencies carry certain risks with them that aren't present with stocks and currencies traded within the United States. Any form of foreign currency is subject to currency risk, or the risk for loss as a result of fluctuations in the market or exchange rates against your own currency.

401k and company stock
Many companies offer 401k and stock options to their employers. While this may sound like a good idea, that isn't always the case. The investors chances of losing a great deal of money if the company folds or goes bankrupt are much greater with newer or start-up companies. In some cases, these new or starter companies will offer company stock as the only investment choice in their 401k plans. If you plan on investing in company stock, make sure you do so when the timing is right and make sure you set limits on how much money you plan on investing before you actually begin. This will help to ensure your retirement savings are safe, regardless of the market.

Over investing, while sometimes not necessarily a bad thing, is definitely possible. In order to avoid over investing, make sure you do enough research and consult with an expert before sinking your life savings into your investments.