Managing Your Risks In The Stock Market


Managing Your Risks In The Stock Market

Managing Your Risks in​ the​ Stock Market
Whenever you​ invest your money in​ the​ stock market, you​ take on​ a​ certain amount of​ risk .​
While there is​ no way to​ get around that risk, it​ is​ possible to​ manage your risk by educating yourself before you​ start trading.
One of​ the​ most important things to​ remember about any investment, is​ that if​ your capital is​ borrowed, you​ take on​ an​ even greater risk than the​ actual investment itself .​
It is​ never a​ good idea to​ borrow, either from a​ lending institution or​ from your credit cards, to​ come up with the​ money you​ need for​ any particular investment .​
This maximizes your risk in​ that, if​ the​ investment doesn't pan out, you​ will still have to​ repay the​ amount you​ borrowed, and​ may even have to​ pay penalties depending on​ your financial position and​ ability to​ repay.
Make sure that before you​ start trading, you​ have planned ahead and​ set aside the​ capital you​ will need to​ invest .​
This will eliminate that third party, and​ ensure all of​ your profits will go in​ your pocket, and​ not some bank's ledger .​
Keep in​ mind, though, not only will you​ need the​ money for​ your capital, but also for​ the​ most expensive part of​ the​ stock market - brokers fees.
While each broker will have different rates, most charge a​ flat fee per trade .​
These flat fees make it​ much easier to​ see a​ return on​ your investment much sooner than you​ would with a​ variable rate .​
This also means that, if​ you​ are starting with a​ fairly large investment of​ perhaps $10,000, and​ the​ brokers trading fee was a​ $100 flat rate per trade, you​ would only have to​ see a​ one percent return to​ break even .​
Of course the​ reverse is​ also true, in​ that if​ you​ are starting with a​ smaller investment of​ only $1000 or​ so, you​ would have to​ see at​ least a​ ten percent return to​ do the​ same.
Your rate of​ return will also depend on​ whether you​ are investing in​ a​ short term or​ long term system .​
In a​ short term system, you​ will have many more trading fees, since it​ is​ based on​ the​ buy low, sell high, do it​ now philosophy .​
With a​ long term system, however, you​ will incur far fewer trading fees due to​ the​ fact that with a​ long term investment, you​ are investing in​ the​ future viability of​ a​ company, rather than in​ an​ immediate merger or​ other change.
Managing your money wisely will help to​ manage your risk .​
But it​ is​ important to​ remember that even when your monetary risk has been considered, there is​ always the​ market risk .​
That is​ to​ say that there is​ always the​ chance that when you​ invest in​ the​ stock market today, there is​ no guarantee that the​ market will exist tomorrow .​
There are no guarantees in​ stock market trading, and​ there is​ no way to​ eliminate your risks entirely .​
But with good financial planning, and​ a​ little common sense, stock investments can be a​ wonderful way to​ provide money for​ your future.






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