Risk Management 02 (Aug 15 - Dec 25)

[winston]

How to reduce risks while staying invested

By Tong Kooi Ong

Don’t own the market. The market as a whole may be overvalued, but your portfolio of stocks should not. Build a portfolio of high-quality companies that are undervalued.

Value investing minimises the correlation of the assets in the portfolio. If they are highly correlated, they will all be either overvalued or undervalued.

In other words, all the assets will be either a “sell” or a “buy”, and therefore there will be no need for an allocation decision.

Source: The Edge

http://www.theedgesingapore.com/smr/?q= ... 1-87358173

[winston]

Three steps to prepare your portfolio for the coming meltdown

by Dr. Richard Smith

1. Follow your trailing stops
2. Keep your position sizes reasonable
3. Use proper asset allocation guidelines.

Source: TradeStops

http://thecrux.com/the-biggest-downside ... -and-hold/

[winston]

How to Preserve Capital When the Proverbial Stuff Hits the Fan

By John Persinos

The rest of this year promises to be volatile, with dangerous unknowns lurking at home and overseas.

Your capital preservation strategy should include the right asset allocation, tailored to your financial goals.

Asset allocation is an art as well as a science. It’s the investment alchemy whereby you balance several ingredients for the proper admixture of risk and reward.

If you’re too heavily weighted towards risky growth stocks, you could pay a steep price in 2017 and into 2018 if many analysts are correct and a market correction occurs.

According to some financial industry studies, about 90% of portfolio performance is related to asset allocation. That’s an eye-opening statistic.

Of course, in a bull market, your allocation should emphasize stocks. In a bear market, you should lighten up on stocks in favor of bonds and cash.

And in a transitional market that’s “in between,” you should strike a balance. At all times, your portfolio should steer clear of overvalued equities.

Under today’s conditions, regardless of your stage in life, you should elevate your cash level to at least 25% and put at least 30% of assets into hedges.

If your portfolio takes a sharp turn for the worse when you’re in your 40s, you still have plenty of time to bounce back. But if your investments take a nosedive while you’re, say, 65, you’re in a far worse predicament.

Source: Investing Daily

http://www.thetradingreport.com/2017/08 ... s-the-fan/

[winston]

Some Big Wall Street Players Are Starting to Sweat a Crash

Here's what to do if they're right...

By SHAH GILANI

Between them, these giants are pushing around close to $1.7 trillion in capital – more than enough for them to be able to make waves wherever they go.

I always use stop-loss orders to exit my positions with plenty of profits.

First, I look at the stock’s chart. I look for “support” below where the stock’s trading currently.

I don’t put my stop orders down right at support levels. Instead, I put them down about 2% to 5% (not percentage points) below where I see support.

I look at the stock’s range of motion over a month. I want to know what kinds of swings up and down it makes. Whatever that range is (say, a 5% range or a 10% range), I’ll place my stop just outside that range, maybe 6% or 11% below where the stock’s trading.

I always raise my stops after a good up-move.

Source: Money Morning

https://moneymorning.com/2017/08/21/som ... t-a-crash/

[winston]

A 5% pullback could happen within weeks

Here’s how David Bianco of Deutsche Asset Management says you should protect yourself

by Stephanie Landsman

There are still doubts on whether tax cuts will get passed in the coming months.

"If there are more doubts on the Fed hiking in December, people are not going to want to own banks going into year-end"

"Stay with growth stocks," said Bianco, who particularly likes technology and health care in this environment.

He refers to cyclical value stocks among the areas most vulnerable in the coming days and weeks.

"Be careful on cyclical value which is energy, industrials and also financials," he cautioned.

Source: CNBC

https://www.cnbc.com/2017/08/31/5-perce ... ement.html

[winston]

Safe Havens

Back in the 1970s, there was a group of stocks known as the Nifty-Fifty that were considered perfect for widows and orphans. These blue-chip names were seen as impervious to swings in the market or occasional recessions. Then, the Nifty-Fifty hit a brick wall and people lost a lot of money.

Everyone knows there are no guarantees in the stock market, but some stocks and industries do provide greater safety than others.

Some investors flock to gold and treasuries as safe havens. I think it’s still a little too early for a heavy allocation in the precious metals, and I also think the bond rally fizzles in 2018.

In the end, there’s no question this market has been confounding even as it was establishing record levels.

Source: Charles Payne, Investor Place

[winston]

How to Prepare for the Next Bear Market Before It Happens

by Alexander Green

1. Rebalance your portfolio.
2. Make your asset allocation more conservative.
3. Favor large caps over small caps and value stocks over growth stocks.
4. Favor dividend payers over nondividend payers.
5. Diversify globally.
6. Use trailing stops.

Source: Investment U

http://dailytradealert.com/2017/09/17/p ... t-happens/

[winston]

How to Avoid 5 Common Investing Mistakes

by Tony Daltorio

Mistake #1: Having No Plan or a Poor Plan
Mistake #2: Not Remembering to ‘Trust, But Verify’
Mistake #3: Thinking You’re Diversified, But Are Not
Mistake #4: Ignoring the Rest of the World
Mistake #5: Short-Term Trading With Your Long-Term Money

Source: Investor's Alley

https://www.investorsalley.com/how-to-a ... =tony-mkbt

[winston]

What investors should do before the bull market gets gored

The current upward stock climb has lasted more than 8½ years.
Financial advisors recommend making sure you aren't holding more stocks than intended.
If you need the money in the next two years, it shouldn't be in equities.

by Sarah O'Brien

Source: CNBC

https://www.cnbc.com/2017/09/19/what-in ... yptr=yahoo

[winston]

To determine your risk tolerance, think about the following

1. How long you want to be in a position
2. What level of return you're looking for
3. The level of discount from the current price that you're comfortable
4. Your exit strategy, should things go against you
5. The type of companies you're interested in owning
6. How much of your portfolio you want to allocate to the strategy

Source: Wealthy Retirement