How to make gains in difficult times

No one can make a killing on the stock market by going along with the majority of investors. If we eliminate the cases where illegal practices – such as insider trading – were followed, major profits are the result of a choice or choices that, when made, went against the trend. Even during prolonged bullish markets, the biggest winners are those who laid the foundations for success in difficult times in the past. The Athens Stock Exchange is going through such a difficult time, having been on a downward trend for the last 30 months. The consensus on the ASE is that expectations for a recovery are low, especially since the advent of the euro, which has resulted in investor interest shifting even more closely to the main European markets at the expense of more peripheral ones. Even if this description is right, even if there is less and less motivation to take risks, even if things get worse before they get better, big profits will be made by those taking big risks. There are some simple ways to reduce these risks. For example, if someone invests a certain amount of capital in certain stocks and in a mutual fund tracking an index – whether Greek or European – he or she will buy more shares and index fund units when the market drops and fewer shares of units when it rises. This strategy, especially when the investor tracks an index, will be rewarded whenever the market rises. Another option concerns share-convertible corporate bonds. Besides the steady yield they offer as bonds, one can realize added value when the bonds are converted into shares. This is also the rationale underlying a company’s main shareholders when issuing those bonds in the first place: a steady yield plus expectations of a future rise in the price of the stock. These bonds, after all, are issued during difficult times. These two choices may not be very high-risk: in fact, they are rather conservative. They do not preclude future profits, however.

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