Investment | July 08, 2020

Have you ever imagined what may happen if you don`t ever invest money? In the current market situation, it’s 100% safer if you don`t invest at all, and therefore no chance of losing any money, right? No, because there is something called time value of money which cause you losses, e.g., the value of Rs 500 as of today is not the same compared to what it was worth 5 years back. So, investing in shares particularly helps us beat inflation in the long run. It is one of the most efficient tools available in the market that allows investors to create wealth. But many people believe putting money in the stock market is like gambling, where you may sometime make money if you have good luck, but most of the time, it wipes away all wealth. Here they go wrong! If you know how to manage the risk while investing in the stock market, you will make more from it than most other investing instruments. Putting all your money in FDs that gives a return of 5% to 5.5% pa is like to throw your money for getting beaten by inflation knowingly, isn`t that risky? If you know how to manage risk in the stock market, you may easily lower the chances of losses and multiply your wealth. Here`s how you can minimize the risk while investing in the stock market.

Diversify your investment

Avoid investing all your money in a single stock. Diversifying investment can reduce the risk to a great extent. Not all your shares will underperform. Your portfolio value will often remain close to breakeven when the market is adverse.

Complete research

Perform comprehensive research of the stocks where you are going to invest in. You are actually going to be a stakeholder in the company in which you plan to invest. Look at the management, balance sheet, key ratios, read the technical charts, and have complete details of the company before investing in it. For example, in the present situation, when the market is so volatile, focus on debt-free companies, and have good cash flow. 

Do not invest your entire savings

Never invest 100% of your savings. Invest according to our age, risk appetite, need as per financial goal. Avoid investing in the stock market for achieving your short-term financial goals. Long duration investment in the stock market is more stable, and it eliminates the risk significantly. Instead of lumpsum, focus on investing in installments regularly.

Stop losses are crucial

Don`t marry your stocks. It is a good idea to set a limit on your losses. Sometimes the stock may not perform as per your expectation. In such cases, if required, don`t hesitate to replace it with a better stock. This is an excellent way to minimize risk.

Monitor your investments regularly

If a particular stock is not going to be relevant in the future, then the best option is to sell it. Also, keep looking for better opportunities. A share may look good today, but after some years, it

 may no longer remain attractive because the market may evolve differently from what you had expected. So, decrease your exposure in such stocks or replace it with a better one.

Investing is all about efficient management of risk and reward. If you don`t take risks at the right stage in your career, you may not get another chance to earn a big return. Excess of everything is harmful, whether it`s having a zero-risk portfolio or having a very high-risk portfolio. It`s better to have an adequate level of risk-while you invest at different stages in your life. Risk is like salt, not having it in your portfolio will make it tasteless, having extra will make you sick! So, better to take an adequate level of risk, neither less nor more!

Authored By: VIDIT JAIN 

(Vidit is working as an intern with the JRK Group of Companies- One Of The Leading Financial Service Provider In Eastern India)


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Vidit JainIntern

Vidit Jain is working as an intern with JRK Group.

avatar-dummy.jpgVidit JainIntern
avatar-dummy.jpgBirendra JainCEO, JRK Stock Broking Private Limited
avatar-dummy.jpgNiraj JainNiraj Jain, CEO, JRK Insurance Broking Pvt Ltd.
avatar-dummy.jpgAmit JainDirector Wealth Management, JRK Group
Arun_profpic.jpgRavi JainChairperson, JRK Group


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