Wealth protection strategies that will help protect your portfolio
Whether the stock market crashes or enters a sustained bear trend, one thing is for sure, you need to have strategies in place to deal with it.
If you don’t and the market turns, chances are you’ll lose a lot of money on the stock market.
There are three wealth protection
strategies that can help reduce your investment risk now and protect you when the market turns…
Wealth protection strategy #1: Asset allocation
Asset allocation involves spreading your wealth across different asset classes. For example, investing in stocks, bonds, property, precious metals and cash.
Different asset types tend to perform differently from one another. By spreading your wealth across different assets, you can reduce the impact of one or two assets performing badly on your overall wealth, Brian Hunt and Ben Morris in The Crux
How you spread your assets is up to you. It depends on your attitude to risk. For example, a more conservative investor would hold less stocks but more bonds.
Wealth protection strategy #2: Position sizing
Position sizing is how much you hold in each stock. You don’t want to be too heavy in one or two stocks. If these stocks take a turn for the worse, your portfolio will pay the price.
You need to work out an exposure you’re happy with.
To use position sizing, you need to use it with the next wealth protection strategy…
Wealth protection strategy #3: Stop losses
To work out your position sizing, you need to work out the risk you’re willing to take on using stop losses.
When a share price hits a stop loss you sell, no questions.
If you decide to run a 20% stop loss, this means if a share falls 20% you sell. In other words, if you invest R100 in a share and it drops to R80, you sell. This means your loss would be 20%.
By using your stop losses along with your position sizing, you can determine how much you’re risking per stock.
So there you have it. Three ways to crash proof your portfolio.
*********** Advertisement ************
The one thing to do to ensure you’ll never run out of money
Have you ever seen financial advisors write articles about how you should try to estimate how long you’ll live and how much money you’ll need?
Look, I’m no medical doctor, but I can guarantee that if you’re healthy right now, you have no idea how long you’ll live. And there’s no possible way for you to figure out how much things will cost years down the road. There are just too many variables.
But the good news is, it simply doesn’t matter.
That’s because there’s a simple but little-known way to essentially eliminate the danger of outliving your money.
I’m about to show you your ‘millionaire lifestyle’ insurance policy...
Click here to find out more…