My Insurance Insider and Finance Blog

Image via WikipediaSome experts believe that investors bear a common notion that stocks, if held for a long-time, usually outperform the market. I don’t know why people do so. Many a times I find that during a downfall or you may say deep correction, some renowned stocks reduced their fats considerably-sometimes up to 50-60%.

Take the instances of recent fall in the stock market around the world including indexes of high rated Nasdaq, Dow Jones, Hang Seng, Shanghai, Nikkei, Straits Times, BSE etc. and their listed stocks. I’m not going here in detail.

You may think “Then what’ll happen to my retirement plan?” You know the stock market has always been risky game and this is reason why stock market exist for its very charectaristic nature. Here the notion is, if you want to gain more, you’ve no other ways but to take risks-be it share market, forex market, commodity or real estate markets. A prudent investor like you should know much about it.

It definitely makes sense to think first about what sorts of risks you are able and willing to take, and then to decide about what potential investment returns you might be looking for.

So, let’s take a step to determine a person’s ability and willingness to take investment risk in the stock market.

Time Horizon for the money to be remained invested is possibly the major point, you should consider at the time of your investment.That means how long you want your money to remain invested.The longer you intend your money to be invested, the higher is the appropriate risk level.

Basically people invest, either in stock market or in other lucrative markets (expecting a higher return on their investment) keeping two broad purposes in their mind-looking for near term gratification of their desires such as buying a home and a car, children’s education, family needs, and some other needs and for long term perspective such as retirement plan.

From my own experiences in stock market,I found that whatever term you choose, you are equally exposed to high risks if don’t know how to play the game of stock investing. I also found that bottom fishing or value investing is one of the best strategy you should be opted in for short term as well as long term perspective. Another worth thinking is to consider investing in a fast growing company such as technology(IT) based companies, power generation companies etc.

But you should always watch out carefully of owning speculative stocks just out of greed for gaining quick bucks in a shortest time possible. In stock market, having greed is the severe drawbacks profiting from your investment. Even I oftentimes, had been the victim of greed. So, be watchful. Otherwise your investment may be jeopardized.

Another option you may consider in the event of a free fall of stock prices is to insure your portfolios against that kind of shortfall by buying a put option(F&O market) as discussed in my earlier post. By doing so you can reduce the risks of investment to a minimal.

By the way, though I’m basically an insurance professional, I’m actively associated with stock market too and technical analysis a bit. So, if you’ve any question regarding insurance or finance matters(especially stock market and insurance claims related matters) please do. I’ll try my level best answering your query.