{"id":1464,"date":"2020-01-20T11:06:01","date_gmt":"2020-01-20T05:36:01","guid":{"rendered":"http:\/\/blog.budwisefunds.com\/?p=1464"},"modified":"2020-12-08T11:14:27","modified_gmt":"2020-12-08T11:14:27","slug":"reduce-investment-risk-with-practical-strategies","status":"publish","type":"post","link":"https:\/\/budwisefunds.com\/blog\/reduce-investment-risk-with-practical-strategies\/","title":{"rendered":"Reduce Investment Risk with Practical strategies"},"content":{"rendered":"\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">We all invest our money in the expectation of earning returns out of it. But what if we did not get that expected return on our investments. Probably we won\u2019t be able to achieve our goals aligned with our investments.<\/span><\/p>\r\n<p><strong><span style=\"font-size: 24px;\">Further Reading: <a href=\"https:\/\/www.mutualfundssahihai.com\/en\/what-risk-investing-mutual-funds\" target=\"_blank\" rel=\"noopener noreferrer\">Mutual Fund Sahi Hai<\/a><\/span><\/strong><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"> This probability or possibility of not earning the expected return on any particular investment is described as investment risk. Nevertheless, one can always prevent himself from falling for this risk by adopting various kinds of strategies. Some of these strategies to reduce investment risk have been discussed below:-<\/span><\/p>\r\n<h2><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script> <ins class=\"adsbygoogle\" style=\"display: block; text-align: center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-6495755798120621\" data-ad-slot=\"6499025866\"><\/ins> <script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/h2>\r\n<h2><span style=\"font-size: 20px; color: #000000;\"><strong>1.) Split and balance it helps to reduce investment risk\u00a0<\/strong><\/span><\/h2>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">\u201cDo not put all your investments in one basket\u201d is a great saying by Warren Buffet. The statement is applicable to all the investors and hence should be followed by everyone. One should diversify his investments across various asset classes like debt, equity, gold, etc. And should not put all their money into only one asset class, let\u2019s say in equity, as it could be very risky if the markets at large do not support and underperform.<\/span><span class=\"tadv-format-panel\" style=\"color: #000000; font-size: 20px;\"><img loading=\"lazy\" class=\"aligncenter wp-image-327\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2020\/01\/sabi.png\" alt=\"\" width=\"696\" height=\"946\" \/><\/span><\/p>\r\n<h2 class=\"entry-title\">Also Read: <a href=\"https:\/\/budwisefunds.com\/blog\/ulip-versus-mutual-funds-which-is-more-suitable-for-you\/\" rel=\"bookmark\">ULIP versus Mutual Funds ! Which is more suitable for you?<\/a><\/h2>\r\n<h2><span style=\"font-size: 20px; color: #000000;\"><strong>2.) Divide to grow <\/strong><\/span><span style=\"font-size: 20px; color: #000000;\"><strong>helps to reduce investment risk\u00a0<\/strong><\/span><\/h2>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">After choosing the allocation towards each asset class, one should decide the further division in that respective asset class chosen. For example, if you have decided to allocate 60% of the investment towards equity mutual funds then you must decide how much you need to allocate towards large-cap, mid-cap and small-cap funds respectively. <\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">This is important because if you put all your investments in small-cap funds then you might have to face the volatility of markets and even losses in the short term.<\/span><\/p>\r\n<h2 style=\"text-align: justify;\"><span class=\"tadv-format-panel\" style=\"color: #000000; font-size: 20px;\"><img loading=\"lazy\" class=\"aligncenter wp-image-327\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2020\/01\/pshr2.png\" alt=\"\" width=\"796\" height=\"1081\" \/><\/span><\/h2>\r\n<h2 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>3.) The pace with the market <\/strong><\/span><\/h2>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Never try to beat the returns of the market by continuously churning your portfolios and betting on the recent past performers. Unnecessarily churning of the portfolios will only increase your cost in the form of exit loads, imposed by the AMCs.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"> You should stay put with your current investments for at least a few years and if still, they underperform its benchmark and peer group then you may switch towards a better scheme.<\/span><\/p>\r\n<h2><span style=\"font-size: 20px; color: #000000;\"><strong>4.) Set your risk appetite helps to reduce investment risk\u00a0<\/strong><\/span><\/h2>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Different investors usually have different risk appetite. And hence instead of imitating portfolios of your peers, one should look at his own risk profile. The risk appetite of every individual is unique to himself. And hence there is as such no strategy which can be followed by all the investors. <\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Investors are easily carried away with the returns and thereby end up making mistakes by investing in risky funds without even knowing their risk appetite and regret later on.<\/span><\/p>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>5.) Beware the temptation to follow the herd\u00a0<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">We all individuals usually suffer from the herd mentality. In other words, we tend to follow what others are doing. Because we think that if they are doing it then it has to be right, which is not correct at all. <\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">We hear and get suggestions from our peers or colleagues about choosing a particular asset class since it has generated extraordinary returns for them in the past. And we even follow their suit. Well, this might work for some but not for all investors as the needs of the investors vary from each other.<\/span><\/p>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>6.) Don\u2019t gamble, research\u00a0<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">One should not choose a fund just because it is highlighted in the newspapers or on several websites. There are several other factors like risk appetite, liquidity needs, time horizon, etc. And an investor must bear all these factors in his mind before selecting a particular fund. <\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Also, if the markets are in a bull run and are generating astonishing returns do not get carried away by just looking at the returns especially of mid and small-cap funds as it could be fatal if things turn around. <\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">For example, till 2017 mid and small-cap funds have been generating high returns of more than 20% and those who have invested at the beginning of 2018 (looking at the recent returns) are crying foul.<\/span><\/p>\r\n<p><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script> <ins class=\"adsbygoogle\" style=\"display: block; text-align: center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-6495755798120621\" data-ad-slot=\"6499025866\"><\/ins> <script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Hence it is in the best interest of all the investors that they should invest based on basic research on their part. Otherwise, take the help of a professional financial advisor.<\/span><\/p>\r\n<p><strong><span style=\"font-size: 24px;\">Further Reading: <a href=\"https:\/\/www.investopedia.com\/terms\/r\/riskmanagement.asp\" target=\"_blank\" rel=\"noopener noreferrer\">Investopedia<\/a><\/span><\/strong><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" id=\"psthrir\" class=\"size-medium wp-image-562 aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-300x88.png\" alt=\"\" width=\"300\" height=\"88\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-300x88.png 300w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1024x299.png 1024w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-768x224.png 768w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1536x449.png 1536w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-2048x598.png 2048w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1200x350.png 1200w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1980x578.png 1980w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/span><\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>We all invest our money in the expectation of earning returns out of it. But what if we did not get that expected return on our investments. Probably we won\u2019t&hellip; <\/p>\n","protected":false},"author":1,"featured_media":1471,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[13],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Reduce Investment Risk with Practical strategies | Budwisefunds Blog<\/title>\n<meta name=\"description\" content=\"Some of these strategies to reduce Investment risk have been discussed below:-...1.) 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