How to play it safe in a risky stock market

No one likes to take risks, especially with their hard-earned money. But when it comes to investing in the stock market, there is no way to completely avoid risk. Fortunately, there are strategies you can use to reduce the risks of investing in stocks. Here are some tips to help you play it safe in the stock market.

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Be safe in a risky market…here’s how!

Playing it Safe

Risk is always a factor when it comes to investing in stocks. While avoiding stocks altogether can keep your portfolio from growing, the risk of running out of money before you run out of time is even greater. With the market losses of last year, many investors are wondering if they should stay out of stocks altogether.

The world economy could be headed for a recession in 2023, according to the International Monetary Fund and other economic forecasters. This could cause a decline in earnings and stock prices, as well as make it difficult for companies to pay and raise dividends.

But, when was there ever a risk-free time? The stock market is known to “climb a wall of worries” and there are ways to manage the risks.

Reduce Risk with High Investment Quality Companies

The first step to reducing risk is to focus on high investment quality companies. These companies have many advantages that small companies lack and can include big banks and insurance companies, telecommunications providers, utilities and pipelines.

Necessity Companies

Also, invest in companies that provide necessities. Grocery chains like Empire Company, Loblaw Companies and Metro Inc. are in demand even in tough times, as people still need to eat.

Growing Dividends

Finally, focus on companies that pay decent dividends and regularly raise them. This can keep up with inflation and you may even experience share price gains as investors find them too good to ignore.

It’s impossible to avoid risk in the stock market, but that doesn’t mean you have to be reckless with your investments. By focusing on high quality companies, necessities, and growing dividends, you can reduce the risks and even experience gains in a difficult market.

This is an edited version of an article that was originally published for subscribers in the January 27, 2023 issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.

The Investment Reporter, MPL Communications Inc.
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