Business & Finance Stocks-Mutual-Funds

High-Risk Stocks Are Also High Yielding

Stock market is commonly believed to be such a place where fortunes can be made or broken.
Yes, that is true but only to a certain extent.
The numerous transactions going on throughout the day might not churn up profits for everybody or every time they decide to trade.
But the ultimate goal of every investor should be to carve out maximum profit with minimum risks.
But then risk cannot be averted in such a volatile scenario such as in a stock market.
So to draw optimum benefit from stock trades, a trader should follow a path that suits his portfolio and his risk tolerance levels.
A person who is essentially in a strong financial position and has a huge amount invested in the stock market that is spread out across a diverse portfolio and has years ahead of him, is dynamic and willing to risk a certain portion of his money in high yield stocks, should definitely take the plunge and make the most out of it.
In case you can handle your risks properly, you might end up with greater profits than the conservative approach could have brought you.
High risk stocks have the general tendency to grow in value quite steeply but are extremely fickle in nature and might stop growing soon and topple down as quickly as it had gone up.
So the secret to succeed would be properly timing the entry and exit.
Shares have to be sold off before they start plummeting down.
In order to shield yourself against the volatility of these high risk stocks, you can use hold orders and stop loss.
Holding order will give you the advantage of buying shares when they reach a particular price.
Similarly, by using the stop loss concept you can sell your shares when they reach a specific price limit that you have set.
By using these features you don't even have to monitor the stock tickers continuously and can get a part of your transaction automated.
Transactions can be very easily and quickly made either by calling your broker or through Internet.
High-risk stocks are also high yield stocks.
But with these particular stocks you might gain significant profits towards the beginning and then might end up losing considerably.
But as the saying goes, where there is no risk there is no gain.
When investors question themselves or are in a dilemma as to why go for these stocks and not those other stocks that are high yield, the answer lies in the risk factors involved in high-yield stocks and the risk management involved in it.
Generally, when people find out that their stocks are low-yielding, they get disappointment and would love to change to the high yield, high risk dividend stocks.
Then with growing experience and increasing knowledge about how the stock market functions, they might then start unwinding from their high-yield strategy and settle for more traditional dividend stocks.
High yield stocks should be ideally used as a cherry that tops an icing on a cake; they should be used in a limited manner in controlled proportions within a portfolio.
And also as one gets older and less risk tolerant the proportion of high yield stocks should be decreased.
High dividend yield stocks are at least less risky than growth stocks as the companies would in all probability continue giving out dividends to their shareholders.
The best way of taking adequate precaution against potential losses from high risk stocks is to have a planned and diversified portfolio.
Sometimes it happens that the falling prices of high risk stock act as a stimulator for other stocks to see a moderate general rise.
In such a scenario, the losses that you have incurred from the high risk stock might as well get compensated by the rising prices of other stocks in your portfolio, thus taking the sting out of an otherwise unfavorable situation.
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