Stock market resets are inevitable in any growing economy. The key to long and good investing lies in the preservation of capital and being keen on not losing money. A good investor thus has to be prepared for change in stock market prices so as to protect his retirement and portfolio from a stock market drop that is basically unavoidable. There are various ways one can choose to invest so as to protect his or her retirement and portfolio from a stock market reset as illustrated below:
1. Investing of non-correlating assets
This can be done by adding non-correlating assets such as: bonds, currency, precious metals or any asset other than stocks in an investment. Investors insist on diversifying the portfolio. Precious metals act assets to withstand inflation. In this case comes the aspect of Gold Individual Retirement Account (gold IRA).The legalized precious stones include: palladium, platinum, silver and gold itself. However, gold is commonly used and thus the name. The precious stones are held on behalf of the IRA account holder. This is good for investors because the end result is low risk since these assets react differently to changes compared to stocks such that when one asset is down the other is up.
2. Use of dividends
This method is the least common but just as effective. Research shows firms that pay a good amount of dividends achieve a faster growth rate than those that do not. Dividends contribute a significant portion of stocks, at times even the whole amount.
Concentrated portfolios tend to be more risky than one that is diverse. An investor can diverse a portfolio by owning a large number of investments in more than one class of assets as it reduces unsystematic risks. An unsystematic risk is one that comes with investing in one company with one asset class.
4. Stop losses
Stops, if well planned protect an investor from rapidly changing markets. Stops involve triggering the sale of a stock at a fixed price. For instance; when you buy a stock at a certain amount with a stop of a certain amount less but close enough, when the price drops to the stated amount, the stock is automatically sold. This protects investments against falling share price.
A major rule that governs successful investors is the do not place your eggs in one bucket’ proverb. Diversification is the way to go. A good investor needs to be keen on loses that he is willing to endure to increase wealth. You ought to protect your portfolio, secure your investments from from any possible volatility.