One of the advantages of having an experienced online stock trading dealer is the precious insight into the stock market that you get to benefit from. It helps you to minimize risks and gain the maximum advantage possible from your investment.

 

Volatility of Stocks

 

It's a known fact that investing is a risky proposition since positive returns can never be guaranteed. The market has witnessed high volatility. With discouraging returns last year as well, investors could wonder if waiting for some kind of an upturn in returns is worth it. Experts believe that a lot of it depends on how you invest rather than the products you choose to invest on. It is important that your portfolio is diversified and well-balanced, and you invest for the long term.

 

Stocks cannot always offer guaranteed returns, and historically we've seen that stock market returns widely vary each year. While the worst one-year return since 1928 was a 43.84% loss in 1931, the best return was 52.56% gained in 1954. Bonds are considered by investors to be safer than stocks but it would be completely blind to not see the volatility they go through as well, as was seen in 2009 when the 10-year Treasury bonds went through their worst ever year, losing 11.2%. Their best year was 1982, when they gained 32.81%.

 

Diversification of assets, where you have a combination of stocks and bonds, could contribute to better returns. However, if you construct a hypothetical portfolio comprising 60% stocks and 40% bonds, returns would still vary considerably. Though simple diversification may help, it alone is not enough.

 

Combining Stocks and Bonds and Long-term Investing

 

Still, investing in a blend of stocks and bonds in a 60%-40% portfolio over a longer term increases your chances of positive returns, and history proves it as is seen in the following information of long term returns published in NASDAQ and compiled by Dave Rowan with NYU Stern's Federal Reserve data.

 

Timeframe

Years

Worst average annual growth

Worst 1-year 60/40 return

1931

-27.33%

Worst 2-year 60/40 return

1930-1931

-20.60%

Worst 3-year 60/40 return

1929-1931

-15.21%

Worst 4-year 60/40 return

1929-1932

-12.01%

Worst 5-year 60/40 return

1928-1932

-5.37%

Worst 6-year 60/40 return

1929-1934

-3.59%

Worst 7-year 60/40 return

1928-1934

+0.24%

 

By holding on to this portfolio for 7 years, historical investors would have obtained a positive return. This hypothetical portfolio returns an average of 8.92% across all seven year periods from 1928 to 2015, something that investors would be happy about.

 

As this information shows, the longer the investment in a blend of stocks and bonds is, the greater are your opportunities for securing positive returns. But you need to be sure that you wouldn’t need the money in a period of five years or less.

 

When you are investing on your own, without any kind of guidance, you could probably be in for some shocks. The Indian stock trading market is no exception to shocks. Whether you wish to trade in the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE), professional assistance would be useful. A reliable online stock trading dealer such as TradeZero can help you identify opportunities while staying away from the risks. Get in touch with us at [email protected].

 

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The content provided here is solely for informational and educational purposes and does not constitute an offer to sell or a solicitation to buy any security or instrument which may be referenced upon the site, or an offer to provide advisory or other services by TradeZero in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investors are advised not to rely on the information contained in this writing to make an informed investment or financial decision. TradeZero explicitly disclaims all liability for any action taken based on any information contained in this writing.