Question

Answer must be in three full paragraphs with one resource given

The age-old saying for investing is “buy low and sell high,” but this is easier said than done. Investors who are scared of falling prices sell their investments, which in turn lowers the price and then creates a snowball effect. Consider a situation where all of your investments are exposed to the stock market and prices are starting to fall. You do not need the money until retirement, which is in 20 years. How would you react to this situation and why? If you decide to sell, what would you purchase instead

Answer 1

If all my Investment were in stock markets and the market is starting to fall these are the certain things which I will do-
1. Try to protect my Investment with an effective hedge strategy- I will buy a put option against the market. I will have to pay a premium for Put option just is justified compared to the protection it gives. All the Big mutual fund manager do it. Even Warren Buffett does it. It's a most effective strategy- If the market falls you get money from put/ If Market rise you get money from your Investments.

Put option strategy is highly effective when markets are highly volatile.

2. I will sell 20-40% of the portfolios of shares which are above its intrinsic value and invest the money in Gold. Gold is considered the most effective hedge against the market. When the market falls, Gold price rise.

3. If markets have really fallen bad and I can see signs of a recovery then I would have gotten a good amount of money from PUT option and Gold. I will search for a value share and invest in it.