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.
The bottom line is that low volatile investment is only theoretical. It is impossible to pick a stock with certainty until market forces are applied on it over time. Until market forces act on a stock, it can never be marked as less volatile. Stock markets depend on seasons to determine their performance. This means that labeling one as less volatile at the beginning of trading can lead to natural market correction later.
Low volatility portfolio label is not a guarantee that you will not make losses. The unique factor is that these losses and the chances of making such losses are less than for other stocks. It takes years to mark a stock as less volatile. The stocks will still experience moments of bulging and slumps. This means that short term observation will return erroneous results. The stocks only protect you from the drastic gains and losses experience in other portfolios.
LVP stocks give lower returns. It is the reduced exposure that invites many investors into this segment. If an investor loves exposure to risk, there are better stocks with impressive returns. In fact, this is a confirmation of the principle that reduced risks bring lower returns while more risky investment produces better returns.
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.
There is money in LVPs for the massive investors. As stated earlier, the returns are usually marginal. However, if your investment is massive, your marginal returns will still be significant. This is why institutional investors find these stocks to be highly attractive. They help them keep their money safely with a guarantee that they will not lose value. Their targets are not 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.
The sure returns guaranteed by LVP are the reason most investors go for the stocks. If the entire market is performing well, these stocks will also perform well. When the performance is poor, the LVP will also experience a downward spiral. The only saving grace with these stocks is their long term stability that almost assures investors of profits, albeit at a reduced rate.
The bottom line is that low volatile investment is only theoretical. It is impossible to pick a stock with certainty until market forces are applied on it over time. Until market forces act on a stock, it can never be marked as less volatile. Stock markets depend on seasons to determine their performance. This means that labeling one as less volatile at the beginning of trading can lead to natural market correction later.
Low volatility portfolio label is not a guarantee that you will not make losses. The unique factor is that these losses and the chances of making such losses are less than for other stocks. It takes years to mark a stock as less volatile. The stocks will still experience moments of bulging and slumps. This means that short term observation will return erroneous results. The stocks only protect you from the drastic gains and losses experience in other portfolios.
LVP stocks give lower returns. It is the reduced exposure that invites many investors into this segment. If an investor loves exposure to risk, there are better stocks with impressive returns. In fact, this is a confirmation of the principle that reduced risks bring lower returns while more risky investment produces better returns.
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.
There is money in LVPs for the massive investors. As stated earlier, the returns are usually marginal. However, if your investment is massive, your marginal returns will still be significant. This is why institutional investors find these stocks to be highly attractive. They help them keep their money safely with a guarantee that they will not lose value. Their targets are not 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.
The sure returns guaranteed by LVP are the reason most investors go for the stocks. If the entire market is performing well, these stocks will also perform well. When the performance is poor, the LVP will also experience a downward spiral. The only saving grace with these stocks is their long term stability that almost assures investors of profits, albeit at a reduced rate.
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