5 Common Portfolio Protection Strategies

Nov-30-2022Blog by – Mr. Ashish AjmeraRead Time: 4 Min.Word Count: 741
435 Common Portfolio Protection Strategies

Saving money and making long-term investments primarily serve the purpose of protecting capital and generating growth; losing money is not an option. The stock market, however, is very unpredictable and offers no firm guarantees. The price of stocks might increase or decrease in response to any crisis or news report.

But how can you guard against such volatility in your financial portfolio? More significantly, how can you ensure that the stocks in your investment portfolio retain their value during uncertain economic times?

The top 5 most popular portfolio-protecting techniques will be covered in this blog post, along with tips on how to apply them to shield your assets from the effects of market risk-induced volatility.

Consider Rebalancing Your Investments

You can spot any modifications in your risk tolerance, strategy, and underlying assets with the aid of portfolio rebalancing. The consensus among experts is that you should review your asset allocation at least once a year to see which holdings may use good pruning.

But it can be advantageous to deviate from your regular timetable when market volatility suddenly changes your allocation for you. Spend some time reviewing (and maybe selling) your overweight assets and deciding where you should increase the weight of your underweight ones.

Invest In Dividends

The least well-known method of safeguarding your money is probably investing in dividend-paying stocks. In the past, dividends have contributed significantly to the overall return of a company. It may occasionally stand in for the total sum.

Purchasing dividend-paying stocks can increase your lifetime earnings while protecting your investments. Dividends offer modest protection when stock prices drop, which helps reduce volatility and keep risk-averse investors in the market. Additionally, they provide extra money for reinvestment during a market slump.

Non-Correlating Assets

Systematic risk, or the risk connected with investing in the markets generally, is the reverse of unsystematic risk. Regrettably, the systematic risk exists constantly. There is a solution to lessen it, though, and that is to diversify your portfolio`s holdings among non-correlating asset types like bonds, commodities, currencies, and real estate.

When compared to equities, non-correlated assets respond to market fluctuations differently, sometimes even the other way. For instance, bonds may increase if an incident causes equities to decline, or vice versa. The ultimate returns of your portfolio can be rounded out by making sure that your holdings are spread across several different categories.

Taking Diversity Too Far

A well-diversified portfolio, according to Modern Portfolio Theory (MPT), is essential for capturing profits and averting the worst losses. By dividing capital, strategic diversification techniques can lessen the risks particular to individual investments.

But Diversifying excessively without research is a common mistake in investment management that novices are prone to, which is the opposite side of the diversification coin. Some novice investors tend to overdo diversification to guarantee that their portfolio is not constrained to a small number of investment possibilities.

Not Taking Professional Help When Needed

Building and maintaining a portfolio is not a simple endeavor for novice investors. You could occasionally need professional assistance. Sadly, when it comes to portfolio management, many beginning investors have a tendency to be reluctant to seek assistance.

But as you are already aware, the stock market is a turbulent place. Sometimes you might have to navigate through stormy seas. When you do, competent support from devoted portfolio managers can greatly aid you in navigating to safety.

Wrapping Up

Investing in the stock market can frequently appear like making future predictions. It is a demanding process that calls for discipline, endurance, and patience. Mistakes unfortunately happen all too frequently. Investors with little expertise need to exercise extreme caution. However, becoming familiar with the typical mistakes aids in creating a long-term strategy and better portfolio. If you adhere to these recommendations, you will be well on your way to creating a portfolio that will provide you with great returns in the long haul.

We will breathe professional life into your portfolio, Ajmera x-change introduces PMS in association with Concept Investwell. Portfolio Management Service is a customized wealth management service that suits the specific objective of a High Net Worth Investor (HNI). 

Your portfolio will be given professional life by Ajmera X-change in collaboration with Narnolia. Narnolia is a top-tier provider of research and consulting services in India, founded in 1997 by Mr. Krishna Narnolia and Mr. Shailendra Kumar. The firm provides premium financial products and services. A multi-asset, multi-strategy framework which is innovative, structured, client-oriented, and process-driven. 

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