What is the most important aspect in investing or trading in Stock Market? I like this question. Many people think security is the most important aspect, but I feel Risk Management is the vital part of investing or trading in the market.
- As we have discussed, the name of the game in Personal Finance and more so in Stock Market, is Risk Management. If security is the sole consideration, no investment is possible in any avenue, leave alone Stock Market. All of us know that in the past reputed banks and sound corporates have failed.
- Now let us discuss ‘security’ in other aspects of life. There are risks in driving a car, riding a bike, travelling by air or even crossing a road. So every day, we are taking a risk on our life which is a lot more precious than a few millions or even billions. As my mentor rightly put it,” where is the question of security in life, when there is no security to life?”
So, in life and more specifically in Stock Market, 100 % security is a myth. When we cross a road, we don’t just walk; we look at both sides before crossing. In the same manner, when we invest in the Stock Market, we manage our risk using a number of tools as already discussed.
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