Holi, a festival of colors, is celebrated to mark the victory of good over evil. With Investment Perspective – Red is called a risk (danger) and in order to overcome this risk (evil), the analysts recommend that investors are not only cautious but also calculating while trading the stock market.

Indian markets closed positively for the second consecutive session on Thursday, with both benchmark indices – Sensex and Nifty50 – rising about 2 percent, while even broader markets followed the frontline indices and finished higher, each up more than 1 percent.

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Stocks as an asset class are volatile by nature and this volatility offers the opportunity to generate additional returns compared to any other asset class. However, this volatility also adds the element of risk.

To avert or mitigate risk, Harshad Chetanwala, co-founder of MyWealthGrowth.Com, suggested investors build the overall and stock portfolio based on ability to take risks and time goals.

He explains that stocks as an asset class are inherently volatile and this volatility adds the element of risk as well as an opportunity to generate additional returns compared to any other asset class.

With regard to short-term needs, the analyst asks investors to consider debt-based investments where the probability of going red and losing is quite low.

And even for medium-term goals, a combination of debt and some equity investment could work, the analyst said, adding that one should only invest in equity if the investment horizon is more than 5 years.

“When we look at Sensex monthly since 2000, there hasn’t been a 7-year cycle where returns are in the red. Therefore, equity is only meant for the long term,” Chetanwala said.

“Another way to reduce the impact on your portfolio is to take advantage of falling stock prices or mutual fund NAVs and keep investing gradually on days when the market is consolidating. Such a strategy will be very beneficial in the long run when the stock market revives,” the analyst added.

Similarly, another analyst Sandeep Jain – TradeSwift-Director states that proper timing will help any investor to avert or reduce risk while trading the stock market. He lists three elements to identify that could ultimately help manage risk: purpose, objective and role.

Jain added that these three things should be clear and identified, either long-term or short-term. In general, a stock market participant considers himself/herself an investor, but if you are not ready to stick around for a long term then he/she is not an investor but rather a trader, the analyst noted.

And traders have their own stop losses and targets, risk management philosophies, TradeSwift Director further said, adding that long investors are more likely to only invest unwanted money and wait for bumper returns unlike traders.

If one cannot wait for the long term, the analyst urges those investors to stop playing in the red (dark) color market, and rather go to gulal (lighter color), such as mutual funds. With regard to short-term investors, the analyst suggests that they should not only be prepared, but also ready to avert or mitigate risk, such as upfront investments.

This post Holi Special Stocks Advice: Analyst Suggests What to Do While Trading the Stock Market to Minimize ‘Red Risk’

was original published at “https://www.zeebiz.com/market-news/news-holi-special-stocks-advice-analyst-suggests-what-to-do-while-trading-in-equity-market-to-minimise-red-risk-181150”