Precautions Against Stock Market Risks

　 　 equity market If there are risks, how to prevent risks are as follows:

1. avoid market risks

Market risk comes from various factors and needs to be comprehensively applied. First, we must grasp the trend. A detailed analysis of the historical data of each stock price change is made to understand its cyclic variation rules and understand its continuous growth capability. For example, in the car manufacturing industry, when the social economy is booming, the profit of the company will be guaranteed, and the consumers of the car will be greatly reduced. During this period, it is not easy to buy its stock easily. The two is to match cycle stocks. Some enterprises are subject to their own business restrictions, and there will be a period of time for a year to stop production and production, and their share prices will mostly fall during this period. In order to avoid losses caused by the fall in share prices, we can purchase some other stocks that start and stop work on a strategic low ground to compensate for the loss of share prices. The three is to choose the opportunity to buy and sell. Based on the historical data of stock price change, the standard error is calculated and used as the general standard for the timing of the election. When the share price is below the standard error limit, the stock can be purchased. When the stock price is above the upper limit of the standard error, it is best to sell the stock on hand. The four is to pay attention to the investment period. The operation of enterprises is often cyclical. When the economic climate is good, the stock market transactions are active. When the economic climate is bad, the stock market transaction will inevitably wither. It should be noted that the stock market's low season should not be used as a major stock investment period. In western countries, the change of stock market is more sensitive to the economic climate, and the stock price has begun to fall 6 months before the recession. For example, in February 1991, when the US economy entered the first 6 months of a new recession, the famous Dow Jones industrial index began to fall, and the stock price began to rebound in the first half of the economic recovery. According to historical data, it is also known that most of its economic boom lasts for 48 months. Therefore, it is possible to correctly judge the position of the economic situation at that time in the rise and fall cycle and grasp the investment deadline.

　 2. dispersion system risk

There is a proverb in stock market operation: "do not put all eggs in one basket". One way is to "diversify investment fund units". In the late 60s, some studies found that if the funds were spread evenly to several or even many companies, the total investment risk would be greatly reduced. They found that the risk of investing in the "combination group" of any 60 stocks can be around 11.9%, that is, if the average fund is dispersed to many companies, the total return on investment will change to 20.5% in 6 months. If you have a cash that is not used for a while and you don't have a large amount of money and you can bear the loss of your investment, you can choose those stocks that will yield high returns. If you have a large amount of cash that you can't afford to lose, you'd better take the method of diversifying investment to reduce the risk. Even if there are accidents, it will be "bright in the East and bright in the west," and will not be completely destroyed. The two of the solutions is "industry diversification". Securities investment, especially stock investment, should not only diversify investment among different companies, but also different companies should not be in the same industry or adjacent industries, preferably some or all sectors, because the common economic environment will have the same impact on enterprises in the same industry and adjacent industries. If the investment is chosen by different enterprises in the same industry or adjacent industries, it will not achieve the purpose of risk diversification. Only enterprises with different industries and unrelated businesses are likely to undermine those benefits, thus effectively dispersing risks. The three way is "time dispersion". As far as stocks are concerned, as long as the shares are profitable, the stock holders will receive dividends and dividends from the company regularly. For example, the companies in Hongkong and Taiwan usually hold a general meeting in March each year to decide the dividend payout per share and the development guidelines and plans of some companies, and to pay dividends in April. In the United States, companies pay dividends once every six months. On the eve of general interest rates, the stock market will know that the stock price will have obvious changes after knowing that the company has to pay dividends. Short term investments should be purchased in large quantities before the date of interest rate, and will be transferred to the stock market after dividends and other benefits are obtained. Therefore, securities investors should distribute their own investment time according to different purposes of investment so as to spread risks in different stages. The four way is "seasonal dispersal". The price of stocks will be quite different from the peak season of the stock market. Because the stock market will drop in the off season, it will cause additional losses to the sellers. Similarly, if the stock market is to buy a stock in a rush at the peak season and the off-season, the cost of the stock will be lost because the price of the stock market will shift from high to low. Therefore, when we can not predict the extent of the stock's slack, we should lengthen the time of investment or investment recovery, not rush to inject capital or withdraw funds into the stock market, and complete the purchase or sale plan in a few months or longer to reduce the risk level. {page_break}

　 3. guard against business risks

Before buying stocks, we should seriously analyze the investment object, namely the financial report of an enterprise or company, study its current business situation and its position in competition and the trend of past profit. If we can keep the continuous growth of revenue and develop feasible enterprises as the object of stock investment, and keep certain investment distance with those enterprises or companies with poor operating conditions, we can better prevent operational risks. If we can thoroughly analyze the material of the enterprise or company, do not look for the surface phenomenon, see its flaws and hidden dangers, and make a sober judgement, we can completely avoid operational risks.

　　 4. avoid Interest rate risk

Try to understand the proportion of the components in the working capital of an enterprise. When the interest rate rises, it will cause greater difficulties to the enterprises or companies that borrow more, thereby affecting the stock price. The rise and fall of interest rates will have little effect on the companies that have less loans and have more capital. Therefore, when interest rates tend to be high, it is generally necessary to buy less or not to buy more corporate stocks. When interest rate volatility changes unpredictable, priority should be paid to those stocks with more capital invested enterprises, so that interest rate risk can be basically avoided.

　　 5. avoid purchasing power risk

In the period of inflation, we should pay attention to the goods with high price in the market, and select enterprises with high profitability and high ability from the enterprises producing such goods. When inflation is unusually high, hedging should be taken as the primary factor. If we can buy stocks of value hedging products (such as gold mining companies, gold and silver manufacturing companies and other stocks), we can avoid the risk of purchasing power caused by inflation.