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The perfect investment pays off far more than you expect with no chance of turning negative. If such an opportunity existed, investors would create such a high demand with an equally high multiple, that it would eventually become just another trade. The quest to maximize potential gains, while risking the least amount possible is what drives equity markets across the globe. Complicated strategies used by institutional firms utilizing interest rate swaps and currency carry trades may be a bit too much for the everyday investor, but that doesn't mean there aren't strategies you can use to make your portfolio risk-resistant. Combat risk with these simple strategies One of the easiest ways to measure risk quickly in a stock is to take a look at its beta. This is a measurement for how much the stock moves relative to an index like the S&P 500 with 1 being virtually equivalent. If the market goes up 1 percent, you can expect the stock to go up 1 percent, as well. A beta of more than 1 indicates that the stock will move in… Read more

It might be an obvious statement to say that the goal of investing is to generate profit, but that's not to say that all profits are created equal. Basing a successful strategy off the basis of total returns alone isn't a valid methodology. There needs to be an accountability of risks taken to achieve the results in order to determine if the strategy is good for long term success or simply a one-off fluke. A portfolio invested solely in commodity futures could achieve staggering gains compared to a diverse stock portfolio, but it also takes on far more risk. The former commodity futures portfolio could just as easily experience extremely high losses, whereas a more diversified stock portfolio wouldn't have those kinds of large swings. In the end, there needs to be a balance between the amount of risk taken on and the estimated returns your portfolio should achieve. The balancing act Let's say we're comparing two portfolios in order to see which one is better. Portfolio A posted a return of 20 percent, while portfolio B only posted a 10 percent gain. At… Read more

When economic times get tough, there's one asset investors run to more than any other – gold. The glittery metal is viewed as highly defensive, since it tends to hold its value and preserve wealth, while stocks and fiat currencies like the dollar can fluctuate. Investors think that gold has an inverse relationship with stocks and the U.S. dollar and act accordingly. But gold's real value actually stems from inflation, a fact that tends to get lost in the background against the cacophony of Wall Street. When it comes to gold as a safe haven asset, there are a number of things to consider before judging its performance. What gold does for investors It happens all the time – the markets start to fall, economic data comes in weaker than expected, or geopolitical tensions rise. The first thing investors look to during these times is gold. The precious metal isn't incorruptible, but as a physical commodity, its value holds strong relative to other assets. But gold isn't an asset that really appreciates over time, unlike stocks. Gold acts as a… Read more

The stock market has continued its long bull run, up nearly 14 percent year-to-date. It's the second longest bull market in history, which was born in March 2009 following the Great Recession. And it's that longevity that has investors wondering – when will it end? Despite setbacks, like the oil crash prompted by OPEC's war on U.S. shale and the subsequent deal to cut production in order to lift prices again, the current bull market has continued on unfettered. But there are cracks showing that could bring about the start of a new bear market. Whether those cracks will widen this year or next is still debatable. Obstacles in the Markets Stocks have climbed without stumbling much so far this year. There hasn't been any sign of a correction and any negative news seems to get absorbed by investors without blinking. But investor confidence may be misplaced. One of the most often quoted indexes on Wall Street is the VIX Volatility Index, commonly referred to as the "fear gauge." Anything over 20 is considered volatile, while anything under 15 is… Read more

Dividend paying stocks are usually popular choices for risk-tolerant and risk-adverse investors alike. For the risk-tolerant, dividend yielding stocks can help diversify against loss while providing extra income to boost returns. For the risk-adverse, the same stocks lower overall risk in the portfolio and provide a steady stream of income and returns, instead of chasing big gains and risking equally large losses. Usually investors think of bonds and treasuries when a conservative portfolio is discussed instead of stocks. And when stocks are included, only dividend yielding ones are screened for. But dividends aren't the only path conservative investors have when it comes to equities. There are plenty of other stock types to consider when building a defensive or conservative portfolio without having to turn to other assets, like bonds and treasuries. Don't count out stocks when it comes to building a defensive portfolio While dividend payers are a no-brainer for investors that seek hedging strategies or defensive stocks, there are several other things to consider before making a decision. Things like having a large market capitalization, stock buyback programs and… Read more