How to Protect your Portfolio in Stock Market? - Economist

The question that everyone asks is what if a correction occurred in the Saudi stock market, American stocks, or any stock market? What should you do in this case?

In this article, we discuss some ways to manage your investment portfolio and for each trader in the stock market, and then the correction in stocks is a normal thing, as every rise is offset by a "correction" drop, which means the market has fallen by 10% or more, the timing of the correction cannot be predicted.

We also find that the ways to deal with the correction differ, the bears may dominate and the correction will last for years and therefore your portfolio will be affected by the amount of the correction percentage.

Hence, the most important way to deal with correction is hedging, It is a type of risk management, much like buying your new car insurance to reduce or eliminate damages in the event of an accident.

It also plays the same role with your investments, and the goal of hedging is to reduce damage to you, not profit, as you may pay for a full year's insurance and no accident occurs.

If the value of your shares is $10,000 and the market goes down by 50% then your loss will be $5,000, and therefore it makes sense to hedge against this loss and not the entire amount.

If the portfolio has $5000 divided into the stock value of $2500 and cash of $2500, then you must hedge $1250, and here is the hedge against your expectation of the market’s decline, and it must be before the beginning of the correction.

There are several options for protecting your stock portfolio, the most famous of which are:

Keep the cache.

Diversify the portfolio through:

And for the record, the best way to hedge is to keep the full cash if you know the date of the correction, but we agreed that predicting its date is not possible, so it is appropriate to keep half of the wallet in cash.

And when you are afraid of the market in general, not for the purpose of modifying your shares. Rather, it is to buy another asset or product that balances the portfolio and this is the best hedge option for beginners.