Today I want to explain one of the biggest mistakes investor's make.
It has nothing to do with what you invest in, where you invest or how much you invest. It goes much deeper than that.
It's got to do with your emotions and behaviour.
The fact is, every investor experiences it at some point. And if you keep doing it, you're guaranteed to lose a fortune.
Let me explain…
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New traders think that when I talk about risking risk 2% of their portfolio, it means investing 2% of what their portfolio is worth.
But that's not what I mean.
Let's say you have R10,000, and you only want to risk 2% or R200 of that amount to trade CFDs.
Here's how much you'll need to invest in your CFD trade…
First some investing/trading 101 basics
Step #1: Know how much you ... ››› more
If you've decided to give contracts for difference (CFDs) trading a go, you need to think about how you're going to manage your money before you begin.
So how much money should you put into each CFD trade you put on?
Let's take a closer look…
You need to start off trading CFDs conservatively
As eager as you may be to make some money trading CFDs, you need to start off putting down... ››› more
When the markets seesaw up and down like they have been of late, it makes many investors nervous. Will the market just keep falling?
The first thing that's important to realise is you can't forecast what's going to happen in the markets. No-one can.
But what you can do is take steps to prepare for what could lie ahead.
This means following a simple investment strategy that removes your e... ››› more
Trading the forex market can be very lucrative. But as with trading all geared instruments, there are risks. And these risks mean losing money.
One of the most important aspects of forex trading is risk management. If you ignore it, chances are you're not going to be trading for very long.
So why is risk management so important? And how can you limit your risks when trading forex?
Read on... ››› more
There are two major benefits of risk management when you trade forex.
Firstly, risk management protects you from losing a large amount of money in one trade.
And secondly, risk management will make you more profitable in the long run.
One key aspect of risk management is position sizing. So how can you make this work for you?
Read on to find out…
Using position sizing as part o... ››› more
Forex trading gives you the opportunity to make handsome profits from changes in the prices of currencies.
Whilst you can make good gains, if you don't put any thought into risk management, you can quickly lose money.
So why is risk management so important when you trade forex? And what sort of risk management strategies should you consider?
Read on to find out…
Risk management is... ››› more
Trading is higher risk than investing.
The gearing aspect of trading instruments gives you the potential to multiply your gains. But this can also work against you and multiply your losses.
So how can you ensure you don't wipe out your trading account with a few bad trades?
Read on to find out…
Two vital ways to manage your trading risk
Managing the downside when trading is yo... ››› more
One common investment mistake is to put too much money in only one or two investments within the same asset class.
It can decimate your portfolio.
So what's the best way to invest your money?
Read on to find out…
An investment strategy to reduce your risk
There is a simple investment strategy that you can follow to prevent this type of mistake hitting your portfolio. It’s ca... ››› more
Trading can reward you handsomely. But don't let the potential gains let you put too much money at risk on one trade.
You need to protect your capital. One of the best ways you can do this is through position sizing.
So what is position sizing? And how can you use position sizing when you trade?
Read on to find out…
What is position sizing?
Position sizing is a trading strategy... ››› more
It's been said that the single most important influence in building equity in your trading account is the size of the position you take in your trades. I disagree.
Let me explain why diversification will keep you poor and the one surprising key you should focus on instead for real trading profits.
Learn from the successful investors in the world
In the book "The Zurich Axioms" (2... ››› more
It might surprise you to hear that there are commonalities between tennis and investing. If you can apply the rules of playing defensive tennis to your investments, you'll prevent yourself from making the biggest mistake in investing. Here's what you need to know…
Investors and tennis players
Retail investors are like amateur tennis players. They make a lot more mistakes than points.
In h... ››› more
When you trade, you need sound money management principles in place. Otherwise one big trade that doesn't go your way could leave you out of trading funds. That's where position sizing comes in. It ensures that you don't risk too much on one trade. And if the trade flops, you'll still have enough money in your trading pot to continue. Let's take a closer look at position sizing…
What is positi... ››› more
When it comes to investing in a particular share, you probably ask yourself: How much should I invest in it? Of course, this depends on your net worth, investment experience, risk tolerance and time horizon. Read on to find out why size does matter and why you should use position sizing…
If you want to know how much to invest in a share, there is a position sizing formula you can use, the team... ››› more
‘Position sizing' is all about money management. But it's not the kind you use to make sure you have enough money on hand to pay expenses like the mortgage, household bills, car payments, etc. The money management connected with position sizing is strictly limited to your investment portfolio. Let's have a closer look at why position sizing removes your emotions out of investing…
Position si... ››› more
Position sizing is a great way to reduce your risk when you invest. But what if you could use stop losses along with position sizing to make the most out of your investment capital. Let's take a closer look at how to increase your position size without increasing your risk…
If you use stop losses along with position sizing, it means you can take bigger positions but still protect your capital,... ››› more
Position sizing is the first and probably the most important way you can protect yourself from massive losses. This is the kind of loss that erases large chunks of your investment account. Let's take a closer look at why you should use position sizing to protect your investments…
Position sizing is deciding what percentage of your total investment capital you are willing to put in any one part... ››› more
When you invest in shares, it's crucial you manage your investment risk. Risk management is vital. Read on to find out three ways to lower your risks…
It’s important you take steps to protect the cash you plan to invest. And it’s also wise to follow some ground rules when it comes to investing.
But there are a number of ways you can reduce your risks, explains Francois Joubert in The Re... ››› more
By using position sizing to limit the amount of cash you put into each position, you can spread your investment risk. That's why it's advisable to invest 5% of your cash into one position. Read on to find out why this is so important…
Spreading your risk is similar to the idea of a diversified or ‘balanced’ portfolio.
Diversification is where investors buy shares in different sectors of... ››› more
Position sizing is an important aspect of portfolio management. But, be careful how you split your pot. If you invest too much in each share, you could be worse off. Read on to find out why…
A general rule of responsible investing and good risk management is that you should never invest more than 5% of your portfolio in any single share.
Say you’ve put aside R100,000 to invest in the stoc... ››› more
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