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Surviving Bond Bubbles and Runaway Stocks

April 29th, 2013 · blog, Guest Post

Stock chart

Some of the most successful entrepreneurs of today have been those who have kept updated with changing trends in investment and technology. When it comes to investment trends, one common problem is the herd mentality. Investors find it hard to break away from what everyone else is doing. Despite their claims of making unemotional, rational decisions, they’re still prone to irrationality.

At any point in time, there is a certain element of risk. Sometimes, those risks are higher than other times. These risks make it hard to increase income via investments. Bonds and equities have been classical modes of investments. However, the risk of a bond bubble bursting or a runaway stock crashing causes nervousness and ambiguity in investments.

Stocks

The idea is to understand that investment in stocks are not going to be uniform. What is being emphasized today may not be applicable tomorrow. The goal is to know the trends for a specific period of time. Investment strategies for high quality and dividend paying equity are working well in our current market. In the stock category, small cap and growth are the best bet. The benefit of this approach is that investors can get exposure to stock appreciation and dividend based payback at the same time.

The kind of volatility that exists in the stock market is a major risk factor. Take the recent Twitter incident as an example. The stock market suffered losses when hackers posted fake news about an attack on White House. As of now, the stock has recovered all its losses. In order to survive the stock market, one has to be patient and wait for the right moment.

Bonds

Bonds are a good source of running income, especially when interest rates are on the rise. One way to protect investments tied to bonds is to reduce their exposure. This holds true when the bonds mature. There has been an increasing trend to move towards strategic income bond funds. These are not long term investments, but the payback is decent.

For instance, if the investment is made in bail bonds, it is high paying, but has high risk as well. Therefore, investors should educate themselves with more info on bonds of that nature.

High paying loans as investment

There are people around who require help with managing debt. Giving high paying loans would be a worthwhile investment. A new, innovative and riskier form of lending is known as peer to peer lending.

The idea of thwarting the threat of bond bubbles and runaway stocks comes from diversifying portfolios. Having multiple investments allows ameliorating of the risk that may be created in one avenue. Being an entrepreneur doesn’t mean going “all in”, but opting for a rational choice.

Being a savvy investor may seem an attractive option, but being a bankrupt investor is something that’s going to hurt the portfolio. This is especially relevant in light of technology-based investors. The idea of investing is to be sure of what type of investment is required and the amount needed to be invested.

A year ago, real estate investments were seen as fruitful, but now the profit has gone static. So it is always important to identify the profit domain, the tolerance and how much monetary loss can be sustained to stay in the game.

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