How to manage risk factors in the stock market while investing?

With the income at its disposal, GenNext is willing to take the risk. Hence, many of them are investing in the stock market. However, while investing there are some unexpected risks. Therefore, be prepared for this and with good planning and understanding, it is possible to earn good profits.

Hyderabad: Some of our earnings should be invested for long-term needs and the schemes chosen for this should meet our needs. So, to achieve our personal goals we should have a clear understanding of the performance of the schemes we are choosing, the amount to be invested, duration and other factors that should be considered before selecting the scheme. It is very important to know the disadvantages before taking the right decision.

We invest to earn profits. But, sometimes we are bound to incur losses. You may not able to digest the prediction over losses, but don't forget that this is a point to ponder. Especially, those who opt for stock market-based schemes should not ignore this point. One must understand the principle that no return can be achieved without loss.

There are various risk factors depending on the type of investment scheme. Mutual fund managers follow various methods to balance the risk of loss. But, ordinary investors are not aware. There is an assumption that all investment schemes of the same type have the same risk of loss. This, too, cannot be formulated simply.

Every scheme has different risks.. in different situations. Generally, fund schemes are classified based on their risk, low risk, normal-medium, medium, medium-high, high and very high. This is called a fund risk meter. These are determined based on market value, volatility and convertibility into cash. Investors should pay careful attention to this riskometer while selecting funds. It is better to choose funds based on your risk tolerance.

Ups and downs...

Markets never move in the same direction. We see many investors withdrawing investments when the market is falling and investing when it is rising. This will damage investments in the long run. Investors should understand that fluctuations in the stock market are natural. Diversification of investments based on risk and return should be ensured. A scheme with higher risk than the benchmark index has the potential to give good returns even in fluctuations. While investing there are some unexpected risks. Be prepared for this. With good planning and understanding, it is possible to earn good profits.