5 Minute Guide For Risk Management In Unlisted Stock Market

The stock market is known to be the way  leading to opportunities for future investment. Undoubtedly, the stock market has the potential to give you immeasurable profit, but the market is full of RISK. 

Yes, investment in the stock market is risky, especially when it comes to unlisted stock. Even though unlisted stocks are riskier, potential investors invest in them as they’re a good source for diversifying portfolios. In fact, unlisted shares offer similar or better return potential as compared to listed shares. As an investor, you must also see profits, losses, ups & downs so that you’re able to get the best return possible. Whether you’re a beginner or potential investor, if you’re looking to invest in unlisted shares in India, you must know about the risk associated with unlisted shares and how you can manage them; here, in this 5-minute guide, you’ll learn about how to manage risk involved in the unlisted stock market. 

Without beating around the bush, let’s get started from scratch. 

An overview of unlisted stock at a glance 

In simple words, unlisted shares are securities,financial instruments, or securities that are not listed in the stock market or SEBI for example, OLA and JIO – both companies have unlisted shares. Since listed shares are well-regulated by SEBI, market pricing & company disclosure are transparent; the risk is relatively lower. Further, transparency and regulation are not available in unlisted shares. Regardless of the risk involved with unlisted shares , these shares have the potential to provide an opportunity for investors to earn a low risk and high return, which is not available in listed shares. 

However, being an investor, you must know about unlisted share price, unlisted share brokers, and where to buy and sell unlisted shares online. 

Risk Associated With Unlisted Stock Market 

Every financial market has a substantial part of risk. Some of the unlisted stock market risks for investors are: 

Liquidity Risks: One of the biggest concerns of active investors is liquidity; in case there is no share listing or the process gets delayed, they will not receive their returns on time.

Less Transparency: Unlisted stock markets are not managed or regulated by anybody or any organization, so the major decision lies with promoters and big investors. It limits the scope of transparency due to less compilations. 

Valuation Problems: The market has lacked liquidation and financial information that fails to determine fair valuation. So, investors might feel that the price they are paying is overvalued or undervalued due to less accessible information.

However, it is not interpreted as the market has no growth potential. Investors can follow measures to mitigate these risks.  

Now, let’s discuss how to manage the risk involved in unlisted shares below. 

Top ways to manage risk involved in unlisted shares 

Undoubtedly, unlisted shares are riskier than listed shares, and their liquidity is limited since they are not listed on the stock exchange. Some investors neglect to invest in unlisted shares because of the risk, but there are ways to manage the risks so that you can reap the benefits. Let’s talk about the ways to curb risk in unlisted shares. 

1. Get assistance from a trustworthy broker. 

It would be difficult for any beginner to invest in unlisted shares without taking help from a reliable unlisted share broker. If you have no idea about unlisted shares, you must connect with the right unlisted shares brokers. A broker will help you learn about pre-IPO shares and unlisted shares in India. In fact, he can also help you manage the risk involved in unlisted shares and help you buy unlisted shares online. 

2. Invest in the right and reliable company 

You want to manage the risk in unlisted shares, right? Therefore, the second tip that will help you reduce the risk in the unlisted shares is to invest in the right company. Yes, it’s true. If the company is reputable and has goodwill in the market, the risk may be less and vice versa. So, always do your research and invest in companies that will help you gain more. 

3. Monitor your investment frequently

Monitoring investment regularly is another important and effective way to manage the risk involved in unlisted shares. You need to keep monitoring and consider reallocating your investment regularly so that you would better know about the status of your investment. The investment allocation depends upon factors such as investment horizon, age, investment goals, risk appetite, etc. 

4. Research and gain knowledge of stock 

Without having enough knowledge of the stock market, you will always be in chaos. You need to study the fundamentals of the stock market and unlisted shares. Once you have good knowledge of the stock market, you will be able to evaluate the risk involved in it and manage accordingly. The more you research, the more knowledge you gain. 

5. Learn to diversify 

Another important way to reduce the risk involved in the stock market is by learning to diversify. To put simply, diversification is a process in which you invest in different assets; you reduce the risk that one investment’s performance might hurt the return of your overall investment. 

The way forward 

The stock market is unpredictable; it’s essential to have proper knowledge about unlisted shares so that you are able to manage the risk. As an investor, if you’re planning to invest in unlisted shares, follow the above-mentioned tips to curb the risk. 

Further, if you want to know about unlisted share prices and looking for unlisted share brokers, Stockify is the right platform to follow. We provide genuine information to educate and help aspiring investors pick genuine unlisted stocks and pre-IPO shares at lowest price. Check their portfolio right away.