Is Risk-Free Equity Investment Possible or Not?

When we talk of investment, the inherent motive is always about generating high returns whilst lowering the risks. Risk and return are often interlinked with each other and it’s hardly an occurrence where we can imagine investment and returns without the cloud of risk hovering above it.

When we talk of India and investment, there are different investment instruments around ranging from the conventional ones like fixed deposits, gold and more to modern-day equity and mutual funds. All of these come with varying degrees of returns and risk factors. The equity market for say already suffers from the myths of being a risky venture. But what if equity investment can be a risk-free endeavour? What if there is a possibility of investing in equity with zero risks? Let’s find out the answer to this.

What’s Risk–Free Equity Investment?

Going by the terminology, risk-free investment is something where you get the returns without the inherent risk of monetary loss. The same goes for risk-free equity investment where it means getting returns from the equity without any fear of monetary loss. Equity is linked to market performance and seeking a zero risk would be impractical to say. However, there are aspects and ways by which you can mitigate or reduce the risks in the equity investments to little to none.  

When you look at the Indian stock market, although it has grown to enlarge since the last couple of decades, it still has only 2.5% of the total population investing in it. That’s quite low in comparison to other nations globally. But why does the Indian equity market suffer such a fate? The word ‘Risk’ has a great role in it. The general consensus is that the equity market is a risky endeavour and normal people can’t afford to give into these risks. The thoughts like equity market are reserved for only the rich ones also have hampered it.

But the truth is far different as equity is one of the high returns generating investment and is equally risk-free in comparison to other investment options. The stats back it predominately with returns of over 15% historically.

Is Risk-Free Equity Investment a Possibility?

The question is literally a borderline thing. If you look at the practical approach, equity cannot entirely be deemed to be free of risk as it is linked with the market performance. But that doesn’t mean that the theme of risk-free equity investment is a mythical thing. There are different strategies and ways by which the risks can be reduced and that’s as good as a risk-free equity investment.

How can you Reduce Risk in Equity Investment?

Here’s how you can reduce risks on your equity investments:

Never ignore the fundamentals:

Often times when we look to invest in the equity, we go for things like the market trend, sentiments and more. And in that, we often neglect the core basics. The core basic before investing in stock is to know the fundamentals of the company and perform the fundamental analysis of stock before moving forward. Fundamental research will allow you to know the company properly and find out whether your investment will yield risk-free returns or not. A company with strong fundamentals will never die down and will always stay around in the market.

Conduct your research:

One of the major things about stock market investment is people lack the knowledge and end up following suit of the market sentiments. Never discount the value of knowledge. Look through the market, research the things, and know about the terms and how the market functions. That way you’ll find out shares that are worth investing whilst having pretty minimal risks.  

Invest in blue-chip stocks:

Blue-chip stocks are one of the best investment options when you think of stability and risk-free nature. Blue-chip stocks refer to the large-cap shares of well-organized companies that tend to have a history of sound financial position. These provide dependable earnings to shareholders and are kind of assured in comparison to other investment options.

Diversify your investment:

Diversification is one of the most important strategies that allow you to reduce the risk is investment substantially. The aspect of diversification looks at the investing into different options whereby even if one of the instruments doesn’t perform well, the returns from the others will offset it and your portfolio value will not be in the decline.

Invest as per your risk appetite:

The risk factor will always remain in the equity market despite the measures we take. So it’s always wise to map your risk tolerance level before investing. That way even if the market turns upside down anytime later you won’t have to bear the grunt. Plan your investments accordingly and you’ll be set for good. The phrase ‘hope for the best, prepare for the worst’ fits the bill completely here.

Risk-free equity investment is an intriguing term and is something that is practically on the borderline. The risk will always remain but that doesn’t mean that you cannot mitigate them. Risk-free equity investment is a possibility if you look at the aspect of mitigating and reducing the risks.


One Reply to “Is Risk-Free Equity Investment Possible or Not?”

  1. Informative article, You mentioned everything about risk-free Equity trading. but we should remember even we may have picked the sweetest stock in the world, but profiting from it will rely on strategies. Trading strategies are as numerous as traders themselves, but by sticking to certain guidelines and looking for certain trading signals, you are more likely to succeed.

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