How to deal with the risks of investing in stocks during periods of fluctuations in financial markets

How to deal with the risks of investing in stocks during periods of fluctuations in financial markets

How to deal with the risks of investing in stocks during periods of fluctuations in financial markets
How to deal with the risks of investing in stocks during periods of fluctuations in financial markets


British newspaper The Telegraph revealed 6 strategies to reduce the risk of investing in stocks during periods of turmoil and market fluctuations in light of anxious investors selling their shares to avoid aggravating losses. The report noted that during periods of economic turmoil and market changes,
Investors usually move from holding stocks of growth-stricken companies that are surrounded by greater risk to well-known, old, reliable companies that pay dividends.

Stock markets have come under strong pressure on several occasions recently amid concerns about global economic growth, alongside the trade dispute between the United States and China, and negotiations between the two sides after they reached a truce.In such cases, anxious investors resort to selling their shares to avoid losses if the markets continue to decline, but selling at a low price means a loss if the stocks recover again.

6 strategies to reduce equity investment risks during financial crises and market fluctuations

1. Shift from growth to value

During periods of economic turmoil, investors usually move from holding stocks of growth-stricken firms that are surrounded by greater risk (such as non-profit technology companies) to legacy, reliable and well-known companies that pay dividends (Such as insurance companies and banks, which are known as defensive options in stock markets).

Another safe haven is value stocks, which are not the preferred companies for investors whose stock prices do not fully reflect the value of their assets, and have become a defensive plan for many fund managers.

2. Looking for a large size

Small businesses are more vulnerable than others, and their shares are often sold during times of crisis faster than their more established major peers, so anxious investors are thinking about avoiding them during the turmoil.

Tom Stephenson, investment manager at "Fidelity Personal Investing", says switching to larger companies will reduce risk, but there may be exceptions to this rule.

3. Focus on dividends

In weak economic conditions, companies that pay good returns become more attractive than they cannot match, and in some markets there are investors who focus only on this type of stock.

In Britain, income funds that aim to provide an annual return to investors focus on this sector of companies regardless of economic conditions or defensive situations.

4. Diversification

Investors are often asked to apply the well-known wisdom of \"not putting all eggs in one basket\", however some trustworthy funds may focus their investments in specific sectors or regions.

For example, the British fund "Fansmith Equity" invests 65% of its money in the United States, while the Scottish "Scotch Mortage" invests 28% of its assets in the technology sector.This strategy can achieve strong gains as investment managers have chosen the best stocks, but the opposite is true. If their choices are not successful, the losses may be fatal.

5. Looking at assets rather than stocks

Some funds look beyond stocks to achieve strong returns, a strategy that is already helping them sometimes, and this may include some assets.Some funds in the UK are planning to pay 7% of the annual income they give to their clients through shares and assets, and they believe that this way they may secure them more profit if the markets are troubled.

6. Comparing active and passive investment

Passive investment funds that closely follow stock indices, may lose as sharply as they can. Unlike active asset managers,Where one can choose or avoid stocks to mitigate the effects of bearish situations, these computer-managed funds and algorithms do not have the luxury of choice, and during market fluctuations they are only going down.


In passive investment funds, there is no place to hide, experts say, and some large companies can dominate the performance of a particular index, which ultimately leads to making the investment as apparently not diversified.



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