It is easy to assume that all investors are good at taking risks. Low Volatility Investments have taught the world that some of the investors are not in it for the adrenaline that comes with risks. They will invest in stocks making little gains as long as their risk is minimized. However, the debate is whether these investments offer the promised returns and whether they are worth it.
LVI are for investors who are not ready to lose any money for whatever reason. This is a reality especially when the market crashes. These stocks are never affected by sudden fluctuations in prices. It means that your losses are significantly reduced. This is why such stocks are dominated by institutions dealing with public monies that would spell doom for the investor if the money was lost.
With low profit margins, one wonders why an investor would opt for such stocks. However, the dominant players in this industry will give you a clue. Naturally, an investor wants to grow his fortune. However, it would be disastrous for an institution to lose public money. This is why investors like pension funds are attracted by the small margins to choose these stocks. A pension fund would still gain a million dollars if it invested 100 million. However, such gains would not impress a private investor who wants to grow his fortune.
The stocks are characteristic and easy to identify in the market. Over the years, the prices of such stocks change by very small margins. This affects both the upswing and down-swing. The stocks are also not affected by market information. For instance, prices of tech firms can change by up to ten percent in one day. However, LVI would take a very long time to achieve one percent price difference.
It is not obvious or true that LVI always under-perform. In some case, the performance is incredibly impressive. Investors consider them to be a safe haven and will invest there when other stocks are unpredictable. This turns tables for investors whose target is long term value. Such incidences are few and far apart.
Most of the investors in LVI engage in fund hedging by placing their money on such stocks. The most rewarding moment for low volatility investors is when earnings from bonds become less impressive. This is why public fund managers like pension funds prefer such investments. Because of a reduced coverage ratio, these stocks experience incredible stability. Fund hedging in this case is performed indirectly.
There is no secret formula for identifying LVI. You need to study the market over sometime. You will identify a trend in different situations where the performance of particular stocks reacts in a particular way. The most common traders are real estate and companies that are not hugely affected by news items. The most common stocks are real estate and commodity companies that are established as well as deal with mandatory or non-optional goods.
Some financial analysts are of the opinion that LVI is just a theory. This conclusion is based on market changes over years where stocks that were considered to be safe end up causing huge losses to investors through slow bleeding. This means that there is no guarantee for loss or profit. It is a matter of chance, like in every other investment option.
LVI are for investors who are not ready to lose any money for whatever reason. This is a reality especially when the market crashes. These stocks are never affected by sudden fluctuations in prices. It means that your losses are significantly reduced. This is why such stocks are dominated by institutions dealing with public monies that would spell doom for the investor if the money was lost.
With low profit margins, one wonders why an investor would opt for such stocks. However, the dominant players in this industry will give you a clue. Naturally, an investor wants to grow his fortune. However, it would be disastrous for an institution to lose public money. This is why investors like pension funds are attracted by the small margins to choose these stocks. A pension fund would still gain a million dollars if it invested 100 million. However, such gains would not impress a private investor who wants to grow his fortune.
The stocks are characteristic and easy to identify in the market. Over the years, the prices of such stocks change by very small margins. This affects both the upswing and down-swing. The stocks are also not affected by market information. For instance, prices of tech firms can change by up to ten percent in one day. However, LVI would take a very long time to achieve one percent price difference.
It is not obvious or true that LVI always under-perform. In some case, the performance is incredibly impressive. Investors consider them to be a safe haven and will invest there when other stocks are unpredictable. This turns tables for investors whose target is long term value. Such incidences are few and far apart.
Most of the investors in LVI engage in fund hedging by placing their money on such stocks. The most rewarding moment for low volatility investors is when earnings from bonds become less impressive. This is why public fund managers like pension funds prefer such investments. Because of a reduced coverage ratio, these stocks experience incredible stability. Fund hedging in this case is performed indirectly.
There is no secret formula for identifying LVI. You need to study the market over sometime. You will identify a trend in different situations where the performance of particular stocks reacts in a particular way. The most common traders are real estate and companies that are not hugely affected by news items. The most common stocks are real estate and commodity companies that are established as well as deal with mandatory or non-optional goods.
Some financial analysts are of the opinion that LVI is just a theory. This conclusion is based on market changes over years where stocks that were considered to be safe end up causing huge losses to investors through slow bleeding. This means that there is no guarantee for loss or profit. It is a matter of chance, like in every other investment option.
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