Behavioral Finance

The analysis of the stock market volatility and ways to mitigate the risk

Oftentimes a successful investing requires the time commitment, ability, and wiliness to take risk. When it comes to the real life, very few investors have the luxury and wiliness to meet these conditions to become successful. In this paper, I analyze the stock market risk and highlight difficulties to remain calm and rational during volatile times. For risk averse investors, one of the solutions is to have a diversified portfolio. The simple 50/50 asset allocation strategy combines a broadly diversified equity index with long-term government bonds. It is one example of a simple diversification strategy.