The first important thing to bear in mind is that there is not one strategy for picking stocks that works all the time for all markets. You might read the opposite somewhere but we can guarantee you that there is no such a thing unfortunately.
It does not mean however that you should just start investing by selecting stocks randomly.
No, you actually absolutely need to have a strategy for picking stocks and this strategy needs to be adapted to the market you are investing in.
Your strategy also needs to be suited to your risk aversion profile.
As a rule of thumb, it is less risky to invest in stocks of large companies than it is to invest in small cap stocks. It is also less risky to invest in stocks of companies that have business in many different countries worldwide and hence less rely on a specific market. As you certainly know, a key world in the investing world is "diversification". Diversification can be defined as a technique of allocating portfolio or capital to a mix of different investments. The ultimate goal of the diversification is to reduce the volatility of the portfolio by offsetting the losses of one asset class by the gains of another asset class.
It is possible to increase diversification without reducing your expected returns. So regardless of where you invest, reducing risk by increasing the diversification of your investments should be a key element for you.
Kommentare