Eliminating risk; that’s a key to safe investing. In fact if it weren’t for “risk” more people, perhaps you, would be active stock market investors.
But “risk” needs to be kept in perspective.
Remember what President Franklin D. Roosevelt said, “the only thing we have to fear is fear itself.”
The fact that there is risk involved in profitable investing shouldn’t cause fear, shouldn’t scare anyone away.
If you are scared of risk perhaps you should ask yourself a few questions:
- Do you drive a car? Do you ride in a car? There is risk in car driving or even riding, that’s why there are insurance companies and auto body repair businesses – because there is risk.
- What about deer? Deer are cute and loveable but I wrecked one car when a deer jumped out in front of me. When I spoke with my insurance company the lady, who lives in Texas, remarked how often she is scared to drive her few miles to work because there are so many deer and so many deer-caused accidents. Risk.
- Here in Montana people hike with bear spray on their belt. Why? Because of bears, especially grizzly bears. They even make a short hike risky; but the trails in Glacier National Park are jam packed with hikers (and sometimes bears). Risk.
- Heck, some of the most common accidents happen at home: slipping in the bath tub, falling down stairs, burning a finger on a hot pan. Risk.
I doubt you can even avoid risk by living in a bubble.
However there are ways to reduce risk, to limit loss of money when you invest in stocks, ETFs or mutual funds.
Working with an investment program that offers a Market Exit Signal (ME) is just one way to reduce risk. The ME I use is based on the equity curve of the stock market. I first learned about equity curve and how it can tell you when an investment strategy is failing or the markets are tanking when I read Mike Carr’s book, Safe Profitable Investing with Relative Strength. Like many things in life, it is almost a hidden gem in his book, but so very powerful it kept me from losing my shirt when the markets dived during our recent recession.
There are other ways to reduce risk and thus to eliminate the fear of investing.
A good investment program will offer one if not many ways of reducing risk. Some of these include:
- Stops – sell signals when an ETF drops a certain pre-set percentage or dollar amount
- Rank decline – sell signal based on a funds position in rank when compared to other funds’ performance or relative strength ranking.
- Equity Curve – performance of a stock when compared to either the market as a whole, against its own history, or the performance of your investment strategy itself.
The important fact to keep in mind is simply that risk always exists in everything, everywhere, always. But risk does not equal fear. With the best investment tools risk can be reduced to almost nothing and fear eliminated so that anyone can enjoy safe profitable investing. This means you, anyone, can grow your income, build a retirement account safely and profitably without worrying about losing your hard earned money.
Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He is the author of the book, “Invest Safely and Profitably.” He began investing in the markets in his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.