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What is Investment Management?

Activists of various stock markets know its constant fluctuations and many changes. That is why the stock market, like other markets around the world, has a lot of risks. You may know people who have lost all their money because they were not an expert in the stock market.

Investors who don’t know the rules of investment management lose their assets. To earn profit in the stock market, it is necessary to learn the rules of investment management and be able to minimize the risk in your investments through that.

 

Investment management

To manage investment to reduce risk, you can follow several principles and methods.

In the following, we will explain some of the most important and practical rules of risk management to reduce risk in investment:

 

Adequate knowledge of the market

The first step in managing investment and reducing risk is to know the market. You must know the market well and learn specific information about it. It is true that in general, they are very similar to each other, but you should keep in mind that each market has its details. For example, if your goal is to work in the stock market, you should go for training related to this market. You can never enter the stock market with Forex market training or you can’t trade stocks with the knowledge you have about cryptocurrency.

 

Building a personal trading system

The most important task for anyone who wants to be a successful in the investment market is to create a trading system and use it correctly. When you learn the methods and types of trading systems in the stock market, you will face a lot of different information. This information is so vast and abundant that no one will be able to learn all of it. So the best thing to do to start is to choose one or two more efficient methods.

Choose the methods in which you feel you will perform the strongest and trade based on them only.

 

Emotion control

To operate in the stock market, you should know that there is no such thing as 100% complete victory in all transactions in any market. Losses and failures are an integral part of the stock market and trading. This rule is for all people. No matter how professional and smart you are, everyone will be subject to failure and loss.

The only difference between losers and winners is how patient they are when they lose. When you have suffered a loss in your trades, it is very important to maintain your confidence, not to get discouraged, and not to act excited. We advise you that if you are not able to control your emotions, at least do not enter the market and trade when the market is not doing well.

 

Determining the limit of profit and loss

Another mandatory task for investment management and risk reduction is determining “loss limit” or “stop loss”, “profit limit” or “take profit”. As we explained in the previous paragraph, “control of emotions”; There is still no perfect strategy that can guarantee 100% success and profitability of trading. Therefore, investors must specify a loss limit and a profit limit for each transaction they make.

 

Many traders, when they enter into a loss in a transaction and the results do not advance according to their analysis and prediction, do not exit the transaction and stay in the transaction in the hope of returning to the market conditions. This hope comes from inexperience and lack of control over emotions and destroys newbies. Determining the limit of loss and the limit of profit and sticking to them prevents these feelings.

 

Managing the amount of investment

Always remember this term when trading:

“Don’t put all your eggs in one basket”

There is no doubt that the capital market is risky, so never act excited and do not invest all your capital or even a large part of it in a transaction, because a big failure in a transaction may cause a heavy blow to your money and soul. Usually, depending on their risk-taking attitude, people invest between 1 and 10 percent of their capital at the beginning of each transaction.

 

Diversification of stock portfolio and investment

When investing, always be careful not to allocate your capital to a single group. Diversify in buying stocks to reduce the risk as unsystematic as possible.

In general, the risk is divided into two main categories, which is described in the following:

 

A) Systematic risk

Systematic risk is a risk that affects all stocks in the market, to a greater or lesser extent. According to its definition, this risk will affect all investors and will not leave an escape route for anyone.

 

b) Unsystematic risk

Unsystematic risk arises for various reasons and affects a group of specific stocks. For example, the rise and fall of the dollar price affect a series of other stocks. If the investor acts intelligently and invests his assets consciously in different stocks, the risk will be reduced to a great extent.

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