Understanding Risks

The higher the returns, the higher the risks. There is no such thing as a FREE LUNCH in this world. 

How can you manage your investment risks?

Diversify

Mom always told you not to put all your eggs into one basket.

A well-balanced investment portfolio involves spreading investment funds among different types of assets and investing in different securities within each type of asset. This reduces risk, because even though one or more investments might falter, others will gain. 

You may give up some gains, but the overall risk of loss is reduced, and you will be in a better position to withstand ups and downs in the market.

Invest consistently

Market conditions are hard to predict. Trying to buy low and sell high is challenging, and most investors fail to sustain any significant returns this way.

Dollar-cost averaging is a disciplined way of investment, where you invest a fixed sum of money at regular intervals, regardless of whether the market is up or down.

For example, if you invest $100 every month, you buy more shares when the market is down and fewer shares when the market is up.

Over a long investment horizon, it would result in a lower average cost per share. There are many regular investment plans available that will help you.

At the end of four months, you own 45 shares at an average of $8.89 per share.

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