Securities Market
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Introduction
The securities market is characterized by both rewards and risks to lose in the short and long term based investment plans due to its volatility. New investors and veterans as well must adhere to specific financial strategies to maintain the benefits stocks and equity funds offer. This write up will delve into select financial strategies to mitigate risks for the recent development in the securities market. Also, it will compare and contrast these strategies and ultimately explain how each is applied to provide a solution for this need.
Two financial strategies
Asset allocation
Investors need to make cautious asset allocation, making informed choices by weighing which investment is worthy of their portfolio with alignment to objectives. Taking a market risk with a goal of growth will require an investor to decide on placing, for instance, 80% of assets in stocks and the remaining 20% in bonds (Shilling, 2019). Thorough information on the possible risks and rewards of each asset classes further places an investor at ease knowing what to expect when the market is affected by inflation as well as the ever-rising and falling of market rates.
Dollar-cost averaging
To gain in the long-term investment arrangement, the practice of a disciplined investment strategy proves worthwhile in investor’s portfolios. This approach is the regular application of a specified dollar amount towards the purchase of stocks, bonds, and mutual funds (Bogle, 2017). Since the share prices are always fluctuating, one acquires more shares when the market has declined and less when there is a rise. Eventually, the average cost of the total stocks in the portfolio will be lower than the average price of those shares.
In conclusion, the idea of asset (stocks and bonds) allocation proves less risky as decisions made on asset classes with assured rewards (He, 2018). However, depending on either short or long term goals, investors achieve their objectives as returns are guaranteed even in the volatile security market. Equally, dollar-cost averaging demands consistent, up-to-date news by the regulators to oversee investors’ acquisition of the highest available number of shares in a rising or declining market (Edward Elgar Publishing, 2016). The strategy prevents one from making impulsive investment assessments based on emotions since it is systematic.
References
Bogle, J. C. (2017). The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns. Newark: John Wiley & Sons, Incorporated.
Edward Elgar Publishing. (2016). Economics of securities law. Cheltenham: Edward Elgar Pub.
He, W. (2018). The regulation of securities markets in China.
Shilling, H. E. N. R. Y. (2019). International guide to securities market indices. (n.p). ROUTLEDGE.