Why is investing in the stock market riskier than saving cash or bond investments? Describe one way to mitigate, or lessen, that risk.
Investing in the stock market is riskier than saving cash or bond investments because stock prices are subject to fluctuations due to various factors such as economic conditions or changing trends. The risk is higher because investors are putting their money into a company that may or may not succeed, and the stock price may go down, resulting in a loss of investment.
One way to mitigate the risk of investing in the stock market is by diversifying the investment portfolio. This involves investing in a variety of stocks across different sectors, industries, and geographic locations. By diversifying the portfolio, if one company or industry fails, the loss is partially offset by the returns from other companies or industries. Diversification reduces the overall risk and increases the chances of earning a profit in the long run. Additionally, it is important to regularly monitor the portfolio and make adjustments as needed to maintain a balanced and diversified portfolio.