Editing 1course Stock Market (section)

== Practical Examples of Risk Management Strategies ==

=== Example 1: Diversifying with ETFs ===
Instead of investing solely in individual stocks, you invest in a variety of exchange-traded funds (ETFs) that cover different sectors, asset classes, and geographic regions. This diversification helps spread risk and reduces the impact of any single investment performing poorly.

=== Example 2: Using Stop-Loss Orders ===
You purchase shares of a high-growth tech stock at $100 per share. To manage risk, you set a stop-loss order at $90. If the stock price drops to $90, your shares are automatically sold, limiting your potential loss to 10%.

=== Example 3: Hedging with Put Options ===
You own 100 shares of a pharmaceutical company that has recently experienced significant price volatility. To protect against a potential price drop, you buy put options with a strike price close to the current market price. If the stock’s price falls, the value of the put options increases, offsetting the loss.

=== Example 4: Dollar-Cost Averaging in a Volatile Market ===
You decide to invest $1,000 monthly into a broad market index fund. During periods of market volatility, this approach allows you to buy more shares when prices are low and fewer shares when prices are high, reducing the average cost of your investment over time.