No market is ever truly safe. That’s a fact as old as the markets themselves. From the ancient agora, to the first stock exchanges, to the modern Wall Street, markets have always been open to the unforeseeable, the unexpected, and the wild. Despite the many regulations, rules, and agencies designed to protect them, markets remain just as prone to risk and volatility as they ever have been. In this article, we’ll examine why markets can never be made truly safe.
1. The Dangers of a ‘Safe’ Market
Investing in a “safe” market can often entice novice investors, as it promises reliable returns and low levels of risk. But even in these so-called “safe” markets there are hidden dangers. Here are two of the key risks:
- Illiquidity Risk: The most commonly traded stock or shares in a market may be easy to buy and sell, however, many of the more “obscure” stocks may have a very limited trading volume. In such a case, it may take a large amount of time to find a buyer, which may mean taking a significant price hit.
- Distorted Data: Market data is often one of the main tools used to predict the trends of a stock. But this data is not always an accurate reflection of the market. It may well be the case that analysts may overstate or understate the strength of a stock or even distort the data itself.
These two dangers should be considered by all investors, regardless of how “safe” the market may seem. Without taking sufficient steps to avoid these risks, investors can face financial turmoil and dramatic losses.
2. Unpredictable Markets and Human Behavior
When it comes to stock markets and other financial markets, unpredictability can be the order of the day. That’s why human behavior plays a major role in how these markets function. We can’t ignore the fact that human emotions can command the direction in which certain stocks move.
When investing, it’s important to always keep an eye on the bigger picture and understand that nobody can ever predict the fluctuations of the market with 100% accuracy. To succeed in investing, it’s essential to have a few strategies up one’s sleeve:
- Never put all your eggs in one basket.
- Stay alert of news sources both on and off the internet.
- Be aware of changes in the market. If necessary, realign your portfolio accordingly.
Getting the right balance between utilizing these strategies and factoring in human behavior is what will help you become a successful investor. This means being able to identify red flags like high-risk investments and staying focused during times of market volatility. Another key is to be aware of your own emotion and make sure that it doesn’t affect your decision making processes. Although it’s impossible to predict what will happen next in the unpredictable world of finance, these strategies can help you make the most of whatever comes your way.
3. The Unavoidable Element of Risk
Part of being an investor requires the acknowledgement of risk. This can manifest itself in many different forms, including changes in the economy and currency fluctuations. That said, investors must be prepared to accept some degree of risk if they are to make the most out of their money.
From a practical standpoint, there are several steps investors can take to manage the risk itself. These include:
- Educating themselves about the investments. Investing in areas where one’s knowledge is lacking can be a hazardous decision. Knowing the ins and outs of a particular investment can help the investor to determine what amount of risk is acceptable.
- Engaging with experts. Experienced advisors, financial planners, and wealth managers can offer invaluable advice when it comes to investing wisely and managing risks. Furthermore, they can alert individuals to potential opportunities that don’t involve taking big chances.
- Monitoring one’s investments. Markets are constantly fluctuating, so it’s important to keep a close eye on investments to ensure they remain in line with the investor’s goals. Additionally, adjustments may need to be made if the investor’s risk tolerance has changed.
At the end of the day, risk is an unavoidable element of investing. The only thing investors can do is be smart about it and take the necessary steps to reduce the amount of risk they’re exposed to as much as possible.
4. Making the Most of an Unsafe Space
Mindfully Design the Space to Make It Feel Safer
No matter the decision or circumstance that led to being in an unsafe space, preparing the environment to make it feel as safe as possible is important. Taking proactive steps to make a space feel more secure can help in staying rational and calm in an uncomfortable situation. Here are just a few ways to create that sense of security:
- Keep the door closed – Making sure the door to the space is shut can help make it feel more off-limits to potential threats or intruders.
- Be aware of your surroundings – Keeping your eyes open and mindful of what’s going on around you can give you an extra level of confidence.
- Use protective devices (alarm systems, security cameras, etc.) – Taking advantage of any protective technology that is available may help make the space feel more secure.
Find Supportive Resources to Help Along the Way
The importance of connecting with resources available to help make the situation more secure should not be overlooked. It’s always(even in a difficult situation) a good idea to reach out to the people and organizations that can offer you the advice and protection that you need. Try to make use of the following supports:
- Friends/family – Talk to your loved ones about what’s going on. It might not be easy to open up about the situation, but it can be extremely helpful to have someone who knows what you’re going through.
- Local law enforcement – You may not always feel comfortable confiding in the police, but having their presence and advice on hand can be beneficial if needed.
- Counselling/therapy – Talk to a professional therapist or counsellor who specializes in a variety of topics that revolve around safety and security.
While it can never be possible to guarantee total safety in markets, there are steps that can be taken to reduce the likelihood of market failure. It is on us as a society to understand our markets, keep track of changes, and learn to navigate them with the right set of tools and strategies. With greater awareness and better risk management practices, we can make the markets more secure, and secure our own future.