Understanding Stock Market Risks

You often hear this - Investing in Stock Market is risky.

In fact, investment of any kind including setting up your own business by nature is risky, and can potentially cause you lose some or all your investing or initial capital.

Actually as a paid employee you also face similar risks of losing your job when you approach 40s or 50s. It is a well known fact that HR department update this list of employees in these age groups during annual budget exercise.

So what are the possible Stock Market Risks and how can we as retail investors mitigate these risks?

1. Price Volatility Risk

• Need to learn how to time your Entry and Exit points
• Buy in batches by Average In (different from Average Down)
• Sell in batches

2. Companies Risk

• Select top tier blue chips that are likely to be rescued by Temasek.
• Limit your exposure to any stock to less than 10%, and for bigger account size less than 5%
• Limit your exposure to any sector to less than 20%, and for bigger account size less than 10%

3. Currency Risk

• Invest in Singapore only

4. Lack of Knowledge and Skills

• http://createwealth8888.blogspot.com/2009/09/investing-knowledge-and-skills.html

5. No Time for Research & Monitoring

• You mean other people got more than 24 hours? Time is the fairest commodity of all and everybody has the same amount of time, no more or no less. 24 hours a day!
• Wake up if you don't have time and stop dreaming.