The most profitable type of trading is the trading with the market index, which involves buying or selling stocks. Although it is easy and relatively quick, if you keep on trading this way for an extended period of time, you don’t get the best return on your investment since you don’t trade with the market as much and thus you are not as sensitive. If you don’t mind trading a little bit on the side, it may be more profitable for you to trade on the upside, but if you want to build up an equity portfolio, you won’t get the best return.
For instance, take the example of investing 10,000 rupees in five shares that will fluctuate by over 20 percent in a week. The investor holds on the buy side, as stocks tend to move by 20 percent in a week. The investor will not get the best payoff as the stocks may move by only 2 percent in a week, making it less profitable to trade on the buy side.
Trading with equity means that if you trade on the buy side for the same amount of rupees, the investor will lose 10 percent of their investment in the week and get back only 20 rupees.
So to trade, you have to trade on the upside of the trading.
What level of risk is too high for you?
Risk is not important to investing if you do not expect to lose money. If you do expect to lose money, you have to calculate how much money you need to keep your portfolio in the black or your net worth.
So if you know your total wealth and your net worth is Rs 10 lakh to Rs 20 lakh, you will need to save at least Rs 20 lakh before you invest Rs 10 lakh in stocks. If you are saving just Rs 15 to 15.5 lakh, you will be able to keep Rs 1 lakh from your portfolio.
How much money do I need to leave my assets for retirement?
As per the chart above, if you want to have a secure retirement for your family, you will have to leave at least 1% to 2% on the equity and real estate investment portfolio depending on your age and income. But you would need to invest at least 4% to 5% of your capital and savings portfolio towards saving for the entire period.
To make sure you get the maximum benefits, you should be planning your investment for the entire period.
How can I reduce risk in my portfolio?
This may seem
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