Investors want to get the most out of their investment without exposure to risk. Low Volatility Investments are a safe way to put money in stock markets without the risk of fluctuations that reduce the value of your investment leading to losses. This is a defensive way of investing that has been popularized by the recent global financial crisis.
The truth is that this category of investment only exists in theory. One cannot visit the market and point with surety at a stock and claim that it is less volatile. Only time determines the performance of all stocks and their yields. Market forces also act on perceived less volatile stocks, leading to fluctuations. It may perform one during one season and poorly during another. The time you buy your stock may also be unfavorable.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
The returns from LVP are lower. Investors only turn to these stocks because of a lower level of exposure. For a person with better market insight and ready to take risks, LVP is not the investment of choice. This is in line with the principle of business that greater risks bring the best returns. When the risks are reduced, your rate of returns will be significantly reduced.
LVP stocks are easy to identify in the market through specific characteristics of a formula. There are pointers that these stocks are exposed to lower risk. These stocks and their operations are rarely on news items because their operations are not too active. Participants also invest for long term gains instead of short term. This means that behavior can only be predicted with a long term view.
There is money in LVPs for the massive investors. As stated earlier, the returns are usually marginal. However, if your investment is massive, your marginal returns will still be significant. This is why institutional investors find these stocks to be highly attractive. They help them keep their money safely with a guarantee that they will not lose value. Their targets are not immediate returns.
The less volatile investments also experience bullish trading moments. The stocks are not immune to market forces and will therefore respond when the winds favor the entire market. This also means that they can experience sharp falls like all other stocks in the market. This opens a window for short term investors to make a kill or the long term investors to cash in.
LVPs have an almost sure return, the attractive factor about these stocks. When the markets are performing well, the stocks also appreciate. If the entire market is experiencing poor performance, the stocks also fall in value. The only guarantee you get by investing in these stocks is long term stability which will preserve your value in the long term.
The truth is that this category of investment only exists in theory. One cannot visit the market and point with surety at a stock and claim that it is less volatile. Only time determines the performance of all stocks and their yields. Market forces also act on perceived less volatile stocks, leading to fluctuations. It may perform one during one season and poorly during another. The time you buy your stock may also be unfavorable.
Low volatility portfolio or LVP only minimizes the risk of market exposure and does not eliminate it. This is a trend that has been observed over the years. The reduction in risk means that you can earn more in the long run. However, this reduction is only dependent on market forces prevailing at the time. The long run remains unpredictable.
The returns from LVP are lower. Investors only turn to these stocks because of a lower level of exposure. For a person with better market insight and ready to take risks, LVP is not the investment of choice. This is in line with the principle of business that greater risks bring the best returns. When the risks are reduced, your rate of returns will be significantly reduced.
LVP stocks are easy to identify in the market through specific characteristics of a formula. There are pointers that these stocks are exposed to lower risk. These stocks and their operations are rarely on news items because their operations are not too active. Participants also invest for long term gains instead of short term. This means that behavior can only be predicted with a long term view.
There is money in LVPs for the massive investors. As stated earlier, the returns are usually marginal. However, if your investment is massive, your marginal returns will still be significant. This is why institutional investors find these stocks to be highly attractive. They help them keep their money safely with a guarantee that they will not lose value. Their targets are not immediate returns.
The less volatile investments also experience bullish trading moments. The stocks are not immune to market forces and will therefore respond when the winds favor the entire market. This also means that they can experience sharp falls like all other stocks in the market. This opens a window for short term investors to make a kill or the long term investors to cash in.
LVPs have an almost sure return, the attractive factor about these stocks. When the markets are performing well, the stocks also appreciate. If the entire market is experiencing poor performance, the stocks also fall in value. The only guarantee you get by investing in these stocks is long term stability which will preserve your value in the long term.
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