In the stock, commodity and forex market, a portfolio refers to a group of financial assets (typically stocks, bonds, and cash equivalents) as well as their counterparts which include mutual funds, exchange-traded and closed funds. They are helped directly by investors or by financial professionals on behalf of their clients. (Information credit: easyMarkets)
The stock market is very volatile in nature. It can so happen that stocks can soar for more than six months and then wobble indefinitely. Daily ups and downs can occur in such markets which can be a source of worry for many investors and traders. Some even fear the worst, total worldwide economic meltdown. Traders, especially the inexperienced ones, tend to make ill-informed decisions out of fear. However there are several measures a trader can take to safeguard against such risks.
• Diversity of Portfolio :- Diversifying a trader’s portfolio should be the top priority. It is an important tool for shielding current investments from any market volatility and loss. Many investors use the majority of their funds to invest in stock mutual funds or exchange-traded funds. However it is a good option to invest the majority of the savings into any other tradable commodity. A mix of owning stocks, bonds, cash, real estate, CFDs and precious metals can be a way to prevent massive losses if the worst happens.
• Switching to Cash Equivalents. :- Whenever there is a chance of any global turbulence in the stock market, experienced traders move into investing cash or cash equivalents. This is extremely important as it can get you out of sticky financial situations. Traders will have a chance to get back to investing in sectors where prices are much lower.
• Hedging:- Hedging depends on risk tolerance and time horizon. So a major dip in the market can set up a trader to earn profits directly from it. One way is by selling stock shorts when a fall in price is predicted. The trader can buy back the stocks when the price is near the bottom. Buying put options are also an alternative where traders can profit when the price of the underlying secure asset drops in value.
• Paying off Debts :- Liquidating some of the stock holdings and paying off outstanding debts can be a great idea when a market crash is predicted. Paying off high interest debts or housing mortgages ensures that the trader will not be surrounded by rising interest rates in a bad economy.
Market crashes and depressions are inevitable, so they will have some adverse effects on a trader’s portfolio. The above measures can be taken to minimize losses and in some cases even earn profits from certain market movements.
The stock market is very volatile in nature. It can so happen that stocks can soar for more than six months and then wobble indefinitely. Daily ups and downs can occur in such markets which can be a source of worry for many investors and traders. Some even fear the worst, total worldwide economic meltdown. Traders, especially the inexperienced ones, tend to make ill-informed decisions out of fear. However there are several measures a trader can take to safeguard against such risks.
• Diversity of Portfolio :- Diversifying a trader’s portfolio should be the top priority. It is an important tool for shielding current investments from any market volatility and loss. Many investors use the majority of their funds to invest in stock mutual funds or exchange-traded funds. However it is a good option to invest the majority of the savings into any other tradable commodity. A mix of owning stocks, bonds, cash, real estate, CFDs and precious metals can be a way to prevent massive losses if the worst happens.
• Switching to Cash Equivalents. :- Whenever there is a chance of any global turbulence in the stock market, experienced traders move into investing cash or cash equivalents. This is extremely important as it can get you out of sticky financial situations. Traders will have a chance to get back to investing in sectors where prices are much lower.
• Hedging:- Hedging depends on risk tolerance and time horizon. So a major dip in the market can set up a trader to earn profits directly from it. One way is by selling stock shorts when a fall in price is predicted. The trader can buy back the stocks when the price is near the bottom. Buying put options are also an alternative where traders can profit when the price of the underlying secure asset drops in value.
• Paying off Debts :- Liquidating some of the stock holdings and paying off outstanding debts can be a great idea when a market crash is predicted. Paying off high interest debts or housing mortgages ensures that the trader will not be surrounded by rising interest rates in a bad economy.
Market crashes and depressions are inevitable, so they will have some adverse effects on a trader’s portfolio. The above measures can be taken to minimize losses and in some cases even earn profits from certain market movements.
Ways to Protect your Stock Portfolio from Market Crashes
Aucun commentaire:
Enregistrer un commentaire