Articles: Six steps for safeguarding investments
Historically, the stock market rises and falls. That is not likely to change, regardless of the conditions following the bull market run-up of 2013.
Naturally, you would like to do your best to maximize your gains and to protect yourself against losses, or at least minimize the risk of exposure to a potentially devastating loss. Here are six suggestions that may be helpful to investors:
1. Be realistic. It is important to understand that no investment is 100% risk-free and that you will incur losses as well as gains over time. If the stock market increases or decreases by, say,
10%, your equity stake will either rise or fall as well, although not necessarily by the same percentage. It is doubtful that you, and you alone, will be immune.
2. Stick with a sound investment strategy. One of the key elements preached by many stock market gurus is to remain consistent. In other words, you should not race off in pursuit of the latest trend. Develop a strategy that meets your personal objectives and tolerance for risk. Although you can certainly tweak your approach, don't forget about the fundamentals.
3. Invest for the long term. Jumping in and out of the stock market on the spur of the moment could result in losses if the market timing is wrong. Avoid the temptation to try to "make a quick buck." If you adopt a long-term investment outlook, you are far more likely to achieve reasonable objectives. Don't make short-term acquisitions or sales that are counter-intuitive.
4. Be disciplined. When you acquire a stock, establish the parameters that would result in the stock's sale. Then follow through on these principles in your selling decisions. In other words, don't sell before the time is right or become greedy by holding onto a stock too long.
5. Don't overreact to media news. Whether the news is good or bad, it does not mean you should go on a buying or selling spree. Try to stay on an even keel and avoid panic-driven moves that you might regret later.
6. View your entire portfolio. A diversified portfolio may hold different investments with different positions. Therefore, when one particular stock outperforms or underperforms, another stock will be doing the opposite. If you don't put all your eggs in one basket, your loss exposure is reduced. Instead of turning all your attention to one stock, consider your portfolio in its entirety.
Volatility is to be expected. Rely on your investment advisors to provide guidance.
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