Question

Identify and address the degree to which you have control of the situations and can influence the outcome when investing in the stock market.

Please write a 2-4 paragraph explanation on the prompt.

Please include an APA citation from a reliable source.

Answer 1

Stock market is subject to a number of risks arisen from a number of controllable and uncontrollable factors. The risks related to the uncontrollable factors is known as systematic risk and cannot be eliminated while the risk that arises from the controllable factors is known as unsystematic risk and can be eliminated by diversification in an efficient portfolio.

So it is possible to diversify your company related unsystematic risks with the help of efficient diversification. But no strategy can overrule the market behavior.

There are a number of ways in which an investor can minimize his risks, though he cannot eliminate it completely.

FUNDAMENTAL ANALYSIS

The investor can do fundamental analysis to find out the companies and the stocks in which he should make the investment. The fundamental analysis helps to find the tur intrinsic value of the stock with the help of EIC framework. Economy, Industry, and Company based analysis is performed to discover the undervalued stocks in market.

TECHNICAL ANALYSIS

While with the technical analysis, he can predict the short term price movement of the stock which would help him to predict the timing of buying the appropriate stock. with a number of tools and charts, an investor can predict the trend ongoing in market.

The selection of stock, as well as the timing of investing is important to make a gain in the stock market.

There is no strategy available that can guarantee you the outcome of the portfolio but you can raise the probability of an outcome by being vigilant and analytic in your investment decision.

Reference:

Tripathi,V.(2016).Security Analysis and Portfolio Management.New Delhi:Taxmann