Returns on financial investments have always been volatile, but starting 2020 it took a new turn. The pandemic has tossed the market into the abyss of uncertainty. This extreme volatility has once again underscored the importance of having a balanced investment portfolio. It signifies that your portfolio must be adequately diversified so that it can expand the gains and limit the losses. This calls for asset investment diversification. This can give you steady returns over a certain length of time, especially if you are new to the market or don’t have very good exposure to analysis and investment. Here is a guide on how you can achieve that.
1) Diversify your asset allocation portfolio
Asset allocation portfolio may include equities, fixed-income securities like bonds, alternative investments and cash. You need a combination of these to get a steady return and avoid a heavy drop in your asset value. Needless to say cash includes both cash in hand as well as cash parked in various savings instruments and schemes offering fixed returns. Bonds usually perform well when the equity market is in doldrums. The most significant asset of a diverse asset allocation is investment in alternatives asset classes like digital currencies, art, licenses, patents etc. A combination of these classes and a prudent policy to allocate specific capital to specific classes can give you a good steady return. This can help you expand your returns and keep volatility under control.
2) Learn trading support and resistance if you are into equities trading
The time to enter or exit a trade is a very significant indicator of your quality of investment. If you are trading in equities, you need to learn how to identify trading support and resistance levels. This is done through a technical analysis. There are tools that can help you identify prices at which certain stocks may face a shift in demand-supply graph. These are inflexion points that define potential exit and entry prices for a given stock.
If the price is in the support level, it means the security is ‘undervalued’ and there is ample opportunity for it to grow. If the price is in resistance level it means that bulls are about to encash the stock and make some profit; so, prices are mostly likely to come down. You need to learn how to identify the support and resistance levels.
3) Go for short to medium term profits
This is not the time to reap dividends over long time investments. You need to learn how to make money by reaping short to medium terms profits in equities trading. However, reaping short term profit is not easy. You need to learn swing trading. This involves using technical analysis and examination of technical indicators to determine whether certain stock is likely to go up or down in the near term. If you are a beginner, you need to take up courses in swing trading strategies for beginners offered by renowned stock brokers.
Sum Up
Desperate times call for desperate measures; needless to say we are going through one of the most desperate times of the century. Nevertheless, you can stay afloat and live a somewhat dignified life if you conduct your business of investment prudently.
