Evolution of Insurance Regulation
The general public is not very fond of the financial services industry. Whenever any crisis breaks out, the financial services industry is one of the first ones to bear the brunt. The fact that AIG, which is one of the largest insurance companies in the world, needed a bailout during the 2008 crisis does not […]
What are Public Enterprises? – Origin and Importance
The public enterprises came into existence as a result of the expanding scope of public administration. The advent of the concept of welfare state after the Second World War and the increasing developmental initiative undertaken by Government across the world, the system of public enterprises was developed. The government sells goods and services to the […]
Trait Theory of Leadership – Advantages and its Limitations
The trait model of leadership is based on the characteristics of many leaders – both successful and unsuccessful – and is used to predict leadership effectiveness. The resulting lists of traits are then compared to those of potential leaders to assess their likelihood of success or failure. Scholars taking the trait approach attempted to identify […]
Perceptual Illusions and Constancies
Perceptual illusion occurs when a stimulus is perceived inaccurately. It can equally be explained as a sensory distortion in scientific parlance. How to Describe Illusions? Illusions provide us important clues on the information processing capabilities of our brain. Even scientific investigations by way of empirical researches may have limitations because the information perceived by way […]
Major Perspectives in Psychology-Psychodynamic Approach
The Psychodynamic Perspective: As per the Psychodynamic approach, human behaviour is an outcome of the role played by various psychological forces and early childhood experiences. The theory lays a lot of stress on the dynamics of relationship between the unconscious or conscious mind and also asserts that behaviour is an outcome of internal conflicts regarding […]
In stock market there is strong relationship between risk and return. Greater the risk, greater the return generally! In financial terminology risk management is the process of identifying and assessing the risk and then developing strategies to manage and minimize the same while maximizing the returns.
Every investment demands a certain amount of risk and for an investor to assume this risk he has to be compensated duly. This compensation is in the form of something called as the risk premium or simply the premium. Risk is therefore central to stock markets or investing because without risk there can be no gains. Successful investors use stock market risk management strategies to minimize the risk and maximize the gain.
In financial markets there are generally two types of risk; first the Market Risk and second the Inflation Risk.
The inflation risk is an important consideration in long term investments where as the market risk is more relevant in the short term. It is the market risk that can be managed and controlled to a certain extent, inflation risk cannot be controlled.
There are certain strategies that can be employed to mitigate the risk in a stock market. The strategies are as follows:
Ask Warren Buffet, the greatest investor of all time, what is your advice to investors and he says ‘don’t lose money!’ But stock market connotes risk and fortunately there are enough strategies for a wise investor to safeguard his money and ensure gain. A careful and timely exercise of these options helps you see of the risk involved.
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