How to Protect Your Investments
The financial market in the United Kingdom has hit a hurricane after the recent geo-political alterations. Even if that is disregarded, there are several things that threaten the investments of people throughout the year.
Such threats include political uncertainty, fragility of the financial markets, cyber risks and many more. In order to help you protect your investments from such threats, we have summoned up a list of strategies.
Release the unsystematic risks
There are two main categories of risk, the systematic and the unsystematic. Unfortunately, there is not much you can do to erase the systematic risk but you can surely eliminate the latter with a few tricks. To start off, it is better to go for a portfolio that includes a large number of stocks. This will help in reducing the amount of unsystematic risks in your investment.
Return on Capital
A great way to protect your investment is to opt for ‘safe investments’. Whether it is income annuities or cash, both will help provide safety for your investment. However, the protection of your investment in this case will be short-term.
A very simple and expert way to protect your investments is through the concept of diversification. This has long been used by investors to make sure they don’t lose their money if a certain investment fails to perform. Basically, you are not supposed to put all your eggs in one basket.
By owning a broader and diversified portfolio in a particular asset class, the investors consequently protect their investments and reduce the otherwise growing unsystematic risk.
Stop losses is one of the best ways to secure your investment. It provides protection against the rapid changes that might occur in the financial market. Although it helps in this regard, there is ample need to plan out the stop losses before you go through with your investment strategy. It must be noted that the key point here is to stop the small temporary losses from turning into big permanent ones.
One of the several ways to have your principal amount protected is to go for Equity Participation or Principal Protection Notes. These notes are similar to bonds because they secure your principal, provided that you hold the notes to their maturity. Investors that are reluctant to taking risks are bound to find the Principal Protected Notes quite attractive. However, you must not jump into it right away. It is better if you first find out the financial position of the bank you are buying these from, to further secure your investment in them.
Limit the Exposure
It is sometimes wise to limit your exposure in the financial market and step back on the level of risk you are taking. If you have invested somewhere, that does not mean you are bound to stick to it, provided it binds you legally. Whenever there is a lot of instability in the market, you should consider repositioning some part of your investments towards a lesser risky area, and lessen your exposure to the volatility of the market.
There are a lot of ways you can protect you investments in the market. The key here is to educate yourself with the possibilities of what can be done with those investments.