Risky Business: How to Invest in the Stock Market with Minimal Risk

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The very nature of investing money into the stock market involves risking your capital, but there are definitely some ways to minimize the risk, even if you can’t eliminate the dangers completely.

Accessing a site that provides you prices and company news can help you to become a better-informed investor, and Money Morning details the gold prices for example, so that you can spot trends and maybe identify trading opportunities in stocks associated with these particular markets.

Here is a look at some trading strategies for those that are more risk-averse and want to try and get the chance to grow their money, but as safely as possible, considering the nature of the arena you are entering.

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Defining risk

It is not always that straightforward when attempting to define the nature and level of risk that you are exposing your cash to.

Investing a penny stock as opposed to a blue chip is a fairly obvious contrast, with the chances of losing your money likely to be far greater with the former rather than the latter opportunity, although the potential rewards may well turn out to be greater, as there is scope for some big rises in price, and falls of course.

It is reasonably simple therefore to categorize some investments as either high-risk or safe, but there are plenty of other scenarios where the risk cannot be classified so easily.

Different risk factors

Each different type of investment comes with either a specific type of risk or various influencing factors that could affect the stability and security of your speculative wager.

Market sentiment is a risk that can affect entire sectors as well as individual stocks. If there is a general loss of investor confidence for whatever reason or the price of oil per barrel falls for example, stocks that are associated with these factors might experience turbulence in their stock price.

Other risks to consider are a lack of liquidity, which means that you might not be able to get your money out when you want to even legislative risks, where rules are changed and this has an adverse effect on the value.

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Defensive stocks

If you are a nervous investor and don’t like the prospect of taking your money on a rollercoaster ride, you might prefer the merry-go-round alternative, which means choosing what are typically defined as defensive stocks.

The utilities are a prime example of what a defensive stock is. Regardless of whether the economy is booming or tanking, people and businesses will always need to use electricity, gas and water.

It is for this reason that the share price of utility stocks tends to go round and round as it were, at much the same sort of price level, rather than fluctuating up and down wildly. Defensive stocks like this definitely don’t come without their risks, but you should enjoy regular dividends and less palpitations when you check the prices, compared to some more volatile trades.

Searching out higher yields

If you are wanting to search out slightly higher yields but still want to operative in reasonably calm investment waters, compared to others, then you might want to take a look at bond and income mutual funds.

Income-oriented mutual funds are a type of investment vehicle where you are entrusting your cash to a professional investment firm and a manager with track record for producing solid returns on a yearly basis.

It often pays to take some professional investment advice, so that you might be able to find a situation where you gain exposure to a cocktail of different of different classes of securities rather than an individual offering, as this will improve your odds of achieving a higher return for your cash.

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Risk-free doesn’t exist

Whatever type of “safe” investment you opt for, it is important to understand that there is no such thing as a risk-free investment.

The only way that you are going to avoid any sort of exposure to risk is to keep your cash in a bank or a deposit box, but even that is not risk-free, when you consider the risk of inflation eroding the value of your money over time.

You can however find some reasonably conservative investment vehicles that might only produce a relatively moderate level of return and income, but at least you should be able to sleep better at night, if you are a nervous investor.

There are ways to invest in the stock market with minimal risk to your capital, so seek them out if you prefer merry-go-round rides to rollercoaster’s.

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