The target for every investor is to reduce his exposure to risk without reducing his returns. Low volatility investments are termed as a safe way to enter the stock market and avoid the fluctuations that eat into your investment. It has been termed by experts as a defensive approach to investment and was popularized by the global financial crisis that wiped out the wealth of many investors.
It must be noted that this idea only exists in theory. This means that you cannot pinpoint a stock as being less volatile until it has been tested by the powers in the market. It is the level of exposure that determines whether a stock is volatile or not. Market forces might favor a stock today but expose it tomorrow. In fact, it is only over time that such investment is regarded as less volatile and not before.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
The returns from LVP are lower. Investors only turn to these stocks because of a lower level of exposure. For a person with better market insight and ready to take risks, LVP is not the investment of choice. This is in line with the principle of business that greater risks bring the best returns. When the risks are reduced, your rate of returns will be significantly reduced.
It is possible and easy to spot an LVP stock in the market because the characteristics are unique. The activities of the stock are usually hidden from public scrutiny because they are a bit dormant. This means that public opinion and daily market forces rarely have an impact on these activities. The investments made by parent companies are also long term. This is why short term market forces do not have an impact on the price.
To get profits from LVP, your investment must be massive. This is simply explained by the reduced returns. This trend attracts institutional investors who do not want to lose funds belonging to members. Their returns are also guaranteed because of reduced volatility. These institutions also have the patience to wait for long term gains before cashing in on their investment. Their target is never to get immediate returns.
Bullish trading also affects the less volatile stocks. This is a confirmation that the stocks are traded in an ordinary market. These stocks will respond to winds that favor certain stocks and not others. There will be moments of sharp fall and rises which gives investors time to buy and also sell. Such moments do not last long before a correction happens.
LVPs almost provide sure returns but their level of risk is greatly reduced. When the entire market is performing well, they will respond positively. When the market is on a downward spiral, they will also decline. The distinguishing factor is a margin that is slightly stable either during a rise or fall.
It must be noted that this idea only exists in theory. This means that you cannot pinpoint a stock as being less volatile until it has been tested by the powers in the market. It is the level of exposure that determines whether a stock is volatile or not. Market forces might favor a stock today but expose it tomorrow. In fact, it is only over time that such investment is regarded as less volatile and not before.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
The returns from LVP are lower. Investors only turn to these stocks because of a lower level of exposure. For a person with better market insight and ready to take risks, LVP is not the investment of choice. This is in line with the principle of business that greater risks bring the best returns. When the risks are reduced, your rate of returns will be significantly reduced.
It is possible and easy to spot an LVP stock in the market because the characteristics are unique. The activities of the stock are usually hidden from public scrutiny because they are a bit dormant. This means that public opinion and daily market forces rarely have an impact on these activities. The investments made by parent companies are also long term. This is why short term market forces do not have an impact on the price.
To get profits from LVP, your investment must be massive. This is simply explained by the reduced returns. This trend attracts institutional investors who do not want to lose funds belonging to members. Their returns are also guaranteed because of reduced volatility. These institutions also have the patience to wait for long term gains before cashing in on their investment. Their target is never to get immediate returns.
Bullish trading also affects the less volatile stocks. This is a confirmation that the stocks are traded in an ordinary market. These stocks will respond to winds that favor certain stocks and not others. There will be moments of sharp fall and rises which gives investors time to buy and also sell. Such moments do not last long before a correction happens.
LVPs almost provide sure returns but their level of risk is greatly reduced. When the entire market is performing well, they will respond positively. When the market is on a downward spiral, they will also decline. The distinguishing factor is a margin that is slightly stable either during a rise or fall.
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