The target for every investor is to reduce his exposure to risk without reducing his returns. Low volatility investments are termed as a safe way to enter the stock market and avoid the fluctuations that eat into your investment. It has been termed by experts as a defensive approach to investment and was popularized by the global financial crisis that wiped out the wealth of many investors.
The bottom line is that low volatile investment is only theoretical. It is impossible to pick a stock with certainty until market forces are applied on it over time. Until market forces act on a stock, it can never be marked as less volatile. Stock markets depend on seasons to determine their performance. This means that labeling one as less volatile at the beginning of trading can lead to natural market correction later.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
LVP stocks will definitely produce lower returns. The basic market principle is that risky investment always produces incredible returns while less risky investment will give impressive profits. The reduced exposure to risk means that your returns will also be reduced. You must be aware of this scenario when making your application.
There is a formula to LVP. The formula that leads to reduction in risk involves the participation of very few players in the stock. Such stock is also not in limelight because it is considered insignificant. Its participation in the market is also on long term basis. This means that every day activities rarely affect its returns. In this light, it is possible to predict the behavior of such a stock over time.
To get profits from LVP, your investment must be massive. This is simply explained by the reduced returns. This trend attracts institutional investors who do not want to lose funds belonging to members. Their returns are also guaranteed because of reduced volatility. These institutions also have the patience to wait for long term gains before cashing in on their investment. Their target is never to get immediate returns.
Bullish trading also affects the less volatile stocks. This is a confirmation that the stocks are traded in an ordinary market. These stocks will respond to winds that favor certain stocks and not others. There will be moments of sharp fall and rises which gives investors time to buy and also sell. Such moments do not last long before a correction happens.
The sure returns guaranteed by LVP are the reason most investors go for the stocks. If the entire market is performing well, these stocks will also perform well. When the performance is poor, the LVP will also experience a downward spiral. The only saving grace with these stocks is their long term stability that almost assures investors of profits, albeit at a reduced rate.
The bottom line is that low volatile investment is only theoretical. It is impossible to pick a stock with certainty until market forces are applied on it over time. Until market forces act on a stock, it can never be marked as less volatile. Stock markets depend on seasons to determine their performance. This means that labeling one as less volatile at the beginning of trading can lead to natural market correction later.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
LVP stocks will definitely produce lower returns. The basic market principle is that risky investment always produces incredible returns while less risky investment will give impressive profits. The reduced exposure to risk means that your returns will also be reduced. You must be aware of this scenario when making your application.
There is a formula to LVP. The formula that leads to reduction in risk involves the participation of very few players in the stock. Such stock is also not in limelight because it is considered insignificant. Its participation in the market is also on long term basis. This means that every day activities rarely affect its returns. In this light, it is possible to predict the behavior of such a stock over time.
To get profits from LVP, your investment must be massive. This is simply explained by the reduced returns. This trend attracts institutional investors who do not want to lose funds belonging to members. Their returns are also guaranteed because of reduced volatility. These institutions also have the patience to wait for long term gains before cashing in on their investment. Their target is never to get immediate returns.
Bullish trading also affects the less volatile stocks. This is a confirmation that the stocks are traded in an ordinary market. These stocks will respond to winds that favor certain stocks and not others. There will be moments of sharp fall and rises which gives investors time to buy and also sell. Such moments do not last long before a correction happens.
The sure returns guaranteed by LVP are the reason most investors go for the stocks. If the entire market is performing well, these stocks will also perform well. When the performance is poor, the LVP will also experience a downward spiral. The only saving grace with these stocks is their long term stability that almost assures investors of profits, albeit at a reduced rate.
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