According to an essay from Investors Guide 2012, some of the great stock ideas that we know may turn out to be wrong (except when they are not). Fluctuations in the August 2011 and February 2012 market due to the European debt crisis challenged what we know about stocks and how they work. Some experts then suggest that some of the great ideas about the stock market might be wrong and might not work out for the current market state.
Volatility is Bad
Many investors make a quick exit once the market goes bad and once solutions for recovering assets and gaining profits seem to be impossible. This attitude is known as the risk on/risk off trait. Volatility is then viewed as something bad and something market goers and investors should avoid. But smart investors know better, volatility would always be a part of the market, and smart can take advantage of a market that goes volatile.
Buy and Hold is the Worst
The buy and hold strategy for buying stocks and investments was dubbed the lousiest and most hazardous way to get into the market. It subjects the investor to extreme fluctuations; it limits the investor from searching for alternatives and creative market strategies to optimize gains and profits. But some economic experts have a different take, they say alternatives fair far worse. What transpired three years ago is a proof, when the S & P 500 failed to meet its benchmark.
Diversification is a Myth
Diversifying funds is said to offer little assurance on the safety of assets and gains. Diversification is said to be affected by radical market changes and economic meltdowns, and this strategy offers little help to protect your wealth. Finance experts contest this argument suggesting that diversification still works even if at times it seems to fail. This strategy can help protect your folios from radical changes that might wreak havoc on your stocks and it might protect you from ending up with miserable gains.
It’s not Always About Safety
Strategies that put you into a safe haven might be costly in the end. Fixed income assets are examples, in events of financial crisis and economic meltdowns, fixed-income assets can protect you, but it can result to steeper prices and an almost zero return of investment. Take the government bonds for example, since 1945; these bonds resulted to negative returns after almost 20 years, compared to 15 from stocks. 15% may not be much but for an investor this can cause shock.
It’s all About the Economy
This principle might be true, but it does not apply at all times, we tend to blame losses and zero return of investments to a crashing economy. Experts say that sometimes, what matters is the state of the company. Economic problems don’t mean the movement has stopped, the economy still continues to expand although in a slower pace. Despite economic downfall, aspects such as investments can still do well, and this depends on the state of the company.
Dr. Amarendra writes for http://www.speedyloan.com where one can get loans for lowest rate possible with fast turnaround time and absolutely free service.