Thursday, August 18, 2011

Portfolio Management: 6 - Risk

Most people focus on the profit and most of the financial industry, news, and advisers do too. They really have a way of talking about risk without actually talking about risk itself...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

In the video I mention that people do not think about risk. Oh they may say that they do. They know a company's debt limit and their competitors' and business model but that is risk to the company not to them.
They have analyzed the technicals of a commodity knowing the support and resistance and moving averages but that is risk to the future not to their portfolio.
How can I tell that they have not thought about their risk? Because when things are going well they talk about how great of an investor or trader they are. When things are going poorly they ask, "What do I do now?" or they sit there watching their trade plummet.
They defaulted into category #4 risk acceptance: whatever happens happens.

You should never ever NEVER be in a trade that goes against you and ask "What do I do now?" You ask and answer that before the trade is entered. If I don't have good answers to potential "What do I do now" scenarios I do not enter that trade.
That's the difference between a trade losing 3% of your account vs 30% of all your money.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets

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