The best Investment Trick to counter the volatility of the Stock Markets. Despite the rise or fall, it will help you avoid loss.
Investments in the stock markets are no longer clever decision but it has become a smart pre-requisite. Major national economies are on the Fastlane, driving towards growth, prosperity, and welfare. Not just India, but most developing countries have set a target for themselves to chase. Many financial experts believe these targets are beyond gravity, however, for a layman the existence of targets only abstracts great news. And therefore, the understanding of one of the best investment tricks can help you increase your net worth many folds.
Stock Markets are highly volatile in nature and they respond to the vibes in the business market. In such a scenario, national governments chasing targets fundamentally garner positivity and hope thus odds of growth in the stock markets are relatively high.
The Best Investment Trick
Stock Markets are expected to grow more than 200% in the coming years. However, the times where the markets fall down are inevitable. But what if you knew the best investment trick that can literally eliminate the chance of huge financial loss for you as an individual? Sounds terrific, isn’t it? Perhaps, for the underlying purpose, here is the gospel from the Jesus Christ of financial markets – Warren Buffet. Descend on it.
The Game of Mid Cap-Large Cap
So here is the game. Let’s suppose a person X who begins investing in large-cap companies. Let’s say, for instance, he invests $10,000 initially. Now, there are two possibilities – either the market will rise or it will fall. If it rises, then X makes a profit on his investments. However, if it falls he would have to incur a loss.
Moving forward with the possibility of fall, if X withstands his investments than it means accepting loss and doing nothing about it. However, in such a situation, there is an option which most people can’t think of – that is switching the investments to the mid-cap companies. Assuming that the market for large-cap companies fell by 20%, the market for mid-cap companies inevitably would fall by 40-50%, corresponding to the overall loss. For this instance let’s take 40%
Therefore, a mid-cap stock whose price was $100 previously would fall down to $60.
Exploiting the Advantage by Loss
In the light of a decline in the stock market, if X switches his investments in large-cap companies worth $8000 (20% deduction on $10,000) to mid-cap companies, he can buy 40% more stocks than he actually would have.
Assuming X followed the path, he now has to sit and wait with patience. The rise and fall in stock markets happen in tandem and are not permanent situations. Hence, if the market fell down, after some time it would rise again. When it rises, X would not only cover his loss but would eventually make exponential profits.
Assuming the large-cap market rises even only by 15%, after falling down by 20%, the mid-cap market would rise by 30% (20:40 – 15:30). In this scenario, X’s worth of $8000 shares would reach $10,399.74. Ergo, he not only covers his loss but eventually makes a profit.
If a person follows this investment trick, he can effectively eliminate the chances of huge financial losses.
All he would need to do is play a little smart and be active around the news and evaluate and analyze the trends of the market.
Life is short and fragile and everyone deserves to live a prosperous and wealthy life. Using the underlying best investment trick any person can become an expert in trading and stock markets. Cheers!