Let’s imagine you’re a rookie investor in the financial markets like world finance williamsburg ky. You’ve been following many of the fads on social media and want to take a punt on investing in the stock market. You research what stocks you should invest your money into, but come across this article that mentions how certain investment strategies could be harmful to your portfolio. This scares you off investing entirely, but what if there were more articles like this one that explained these risks?
1. Quick Turnover Strategy
This strategy is based on short selling stocks to this effect: If a stock goes down too much, then sell the stock and buy it back at the same price. Repeat this process as many times as possible, avoiding the cash buffers of small-cap stocks. This strategy is only successful if the bubble has just burst, meaning the company will go up again. This ensures that you see profits, but will also put your equity at risk in case there is no recovery.
2. The 1% Rule
The aim of this rule is to secure an income from volatility in your portfolio by buying a percentage of each stock under $1 per share every day. By doing so, you will secure a healthy income from your portfolio without exposing yourself to the risks of market downturns. However…this strategy is only profitable because of the amount of time allowed for each stock to grow. If all your money is invested in this strategy, you will be worse off than if you had a normal balanced portfolio.
3. The Superman Strategy
This strategy relies on the belief that there will always be someone or some company that can jump in at any time to save the day. This could be through a takeover or buyout and is completely unrealistic because it doesn’t happen often in real life. The most common outcome is that the stock price plummets and puts your equity at risk again.
4. The Hedge Fund Strategy
This strategy allows you to get into the stock market early on and pick up all the stocks that are going down. Your aim is to sell these stocks before the market recovers, putting yourself in a positive equity position. However, if you have so much money invested in this strategy that you have a financial crisis, or can’t put any more money into it then you will be in trouble.
5. The Fake Strategy
In order for this strategy to work well, your portfolio must have a large amount of shares and a high turnover rate. It also requires low equity risk as there are very few winners for every loser as with most investments. The strategy is also affected by factors that are outside your control, such as exchange rates and the global economy.
6. The False Investment Strategy
This strategy relies on long-term gains in stock market returns without considering the risks of investing. These investments would be similar to the fad strategies such as momentum or crossover opportunities, where you pick up a stock before the buzz has died down and then sell it right before it goes up again. However…the value of these stocks may not increase in line with their original purchase price – they may not even increase at all because they were overpriced at the outset. This can be a disaster for your investment portfolio if your aim is to make profit from the rise in stocks over time .
7 . The Stockpile Strategy
This strategy is based on the belief that a person can invest an unlimited amount of money in the stock market and will always make money. This is not true and you’d be risking the security of your equity. The aim here is to lock in gains and capital gains tax but this strategy means you’ll miss out on dividend income. If you are investing more than usual, then there’s a very real possibility that your hard work could go up in smoke for no reason at all, meaning you lose out on both cash and gains tax. Also, if there’s a correction, then all of your investments could plummet – this would mean losing out on earnings from dividends or capital gains as well….
8 . The Stock-Picking Strategy
The aim of this strategy is to pick up shares that have been going down in value and then sell it just before it goes up again. This is similar to the hedge funds strategy but you need a very high amount of capital which means you are putting yourself at high financial risk, especially if there’s another crash. The idea behind this strategy is to make money from large variations in stock prices, but oftentimes stocks don’t go down as much as they should or don’t go back up quite so quickly. This means this strategy is not very useful for small investors and those not based in the USA.
Conclusion
These strategies are sound and profitable in the short term, but ignore the risks that you will be at to avoid these. It may take off your profits in the short term, but will leave you with nothing in the long term.
Stay safe out there.
