Stop any loss in finance management.
Joseph Stone Capital on how to prevent losses in investment
No investor buys securities or makes investments that are expected to see a downfall in costs in the future. Though the investment objective for everyone is profits, the likelihood of loss in the investment market is always present and cannot be ignored. Thus, we cannot completely eliminate the losses but can find ways to reduce their possibility.
Joseph Stone Capital talks about strategies to manage losses:
- It is important to confirm a trend before getting into an investment market in a rush. Identifying a breakout can appear to be the perfect entry point. But it is essential to study the trend properly first rather than making decisions in a panic. Two things must be taken care of while deciding upon the entry point –
- The costs must be fairly stabilized, and
- If the breakout appears irregular, you must wait for costs to reflect correctly.
- You can place a stop-loss order to buy or sell specific things when they reach a particular price level. You can also set up trailing stop loss which is particularly important if you wish to retain the gains you have made. In trailing stop loss, the stop loss level moves as the cost of equity go up.
- You should be attentive to catch a sell signal that tells you it is time to sell off. A sell signal is a condition or a cost level beyond which the investor may incur losses. It is based on fundamental and technical analysis of a stock that comprises several crucial parameters derived from the company’s financial statement. It is essential that the investor is watchful of these signals and act appropriately.
- A financial emergency can come anytime! So, one needs to cash in investments anytime even when the markets are down. This loss can be reduced if one maintains adequate liquidity. If one has liquid assets in the portfolio, then the existing investments can deliver optimal long-term returns and can benefit from any periodic market corrections.
- Rather than making a quick buy by timing the market, one should focus on staying for a longer time in the market. Only then can one take the benefit of compounding. If one is invested for a longer time in the stock market, then the smaller corrections would not affect the portfolio and will reduce the overall investment loss.
- It is excellent practice to invest in diverse stocks that are diverse in terms of industry, market capitalization, and other related factors. The selection should be in such a manner that if a stock falls in a particular situation, the other stocks in the portfolio stay unaltered and can at least cover up the losses.
According to Joseph Stone Capital, losses are an inevitable part of investment markets. But applying the above-discussed strategies and staying watchful of the market situation can help you minimize your losses to an extent.