If one has learned to manage the risk related to investment, he will enjoy the benefits from it in long run.
The investment risk is presumed to be of two types. Some people consider the loss of money as an investment risk. While others are determined to get anas high return as possible from a certain amount of money invested within a certain period of time. So, an investment risk is linked to return on investment also.
A research demonstrated that majority of the people tend to prevent risks instead of making efforts for accumulating profits. They are basically categorized as risk avoiders.
The theory of high probability of facing risk accumulates fear within a person. Thereby, a person tends to avoid this risk and also loses the chance of getting the return on that investment. Because, the higher the risk an investor takes, the higher can be the return on that investment.
To achieve success while making an investment decision, a person needs to consider ‘time’ as a crucial aspect. A person either spends his money or save his money. Savings are used in the times of emergency, need, retirement, and other such purposes. So, savings have a brief time frame. You cannot take a bigger risk with them for a long-term investment. You need to use the money from amongst the investment portfolio of yours, with a long-term frame, if you have to take a bigger risk. Means you can do without this amount of money for a longer time in contrast to the savings: without which you would not be able to survive for a longer time. Hence, you are required to define your time limit so that you can resist high volatility.
Try to make use of the dollar-cost averaging. It is a criterion that helps in reducing the influence of time on performance. When a transaction is performed with a constant dollar amount and predefined time, the sentiment related to timing the investment decisions are reduced. It makes a person purchase more shares during the down periods of the market, and fewer shares during high periods. This ‘buy low’ discipline makes the cost per average share lower than the average market price.
Instead of putting all your eggs in one basket, try to do the opposite. Invest in different companies and securities, instead of owning a single stock of a single company. Such diversification of your investment will help in reducing risk and increasing probability of gaining a higher return on investment.
The investment risk is presumed to be …