Why reducing your investment risk is so important
If you take on huge amounts of
risk when you invest, your money is much more vulnerable. The last thing you want is to lose your investment if the market takes a turn for the worse.
So to ensure you’re in a position to benefit from your investments in the market, it’s vital you keep an eye on the risks you take on too.
If you can minimise your risk, you’re in a much better position to succeed over the long-term.
Four ways to cut investment risk
Here are four risk-reducing investment strategies to apply to your investment portfolio…
Risk-reducing strategy #1:
Don’t feel as if you have to have all your money invested in the market. It’s a good idea to hold some of your capital in cash.
By keeping some cash aside, if the markets pullback, you can take advantage of any bargains.
Risk-reducing strategy #2:
Focusing on value stocks is key to reducing your risk. The price you pay for something will determine how much money you make.
So try to buy decent companies at low prices than fantastic companies at high prices. This way, you’ increase your chances of making money over the long-term.
Risk-reducing strategy #3:
This very thought scares many investors off, but you need to learn to buy shares when prices are falling.
But remember, prices could continue to fall for a while. Chances are you’re not going to time the market bottom.
Risk-reducing strategy #4:
Avoid investing in companies that have a lot of debt. When times are tough these companies struggle the most.
A bad spell could be the end of a company laden with debt.
So there you have it. Four risk-reducing strategies to follow if you want to reduce your investment risk.
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