The goal for investors in all fields is to make the most profit with the least investment. This is why an investor will turn to low volatility investments because they are immune to sharp falls and fluctuations in prices. Such fluctuation eats into the profits of investors and reduces their value in the market. This defensive investment approach became popular during the global financial crisis.
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.
LVP stocks will definitely produce lower returns. The basic market principle is that risky investment always produces incredible returns while less risky investment will give impressive profits. The reduced exposure to risk means that your returns will also be reduced. You must be aware of this scenario when making your application.
There is a formula to LVP. The formula that leads to reduction in risk involves the participation of very few players in the stock. Such stock is also not in limelight because it is considered insignificant. Its participation in the market is also on long term basis. This means that every day activities rarely affect its returns. In this light, it is possible to predict the behavior of such a stock over time.
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.
When the market is bullish, LVP will also be affected. This indicates that the investment is still in a normal market. Trading winds still affect the stocks. However, the falls are only sharp and bulges slight with correction helping to restore the value of these stocks.
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.
LVP stocks will definitely produce lower returns. The basic market principle is that risky investment always produces incredible returns while less risky investment will give impressive profits. The reduced exposure to risk means that your returns will also be reduced. You must be aware of this scenario when making your application.
There is a formula to LVP. The formula that leads to reduction in risk involves the participation of very few players in the stock. Such stock is also not in limelight because it is considered insignificant. Its participation in the market is also on long term basis. This means that every day activities rarely affect its returns. In this light, it is possible to predict the behavior of such a stock over time.
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.
When the market is bullish, LVP will also be affected. This indicates that the investment is still in a normal market. Trading winds still affect the stocks. However, the falls are only sharp and bulges slight with correction helping to restore the value of these stocks.
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.
About the Author:
Get valuable investment tips, right now. You can also get more info about great low volatility investments on our website at http://www.glidepathfinancial.com today.
