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Minimizing Your Risk: Your Belt, Suspenders and Net

(Please scroll down for immediate information on your belt, suspenders and net.)

Why Minimizing Risk is Vitally Important to You

Markets correct.

When they do, many – perhaps most – investors lose most of what they had “made” while markets climbed. We strive to protect your gains by minimizing your losses when corrections occur.

Here are just some examples of market corrections that cost millions of investors their financial security, their retirement lifestyle, and often their health. This is serious stuff:

  • In 1987, over a 14-day trading period, the S&P 500 lost 31% of its value, including a 20% loss in a single day. That same year NASDAQ lost 36% of its value in less than three weeks.
  • Between 2000 and 2002 the S&P 500 lost 49% of its value. During that same period NASDAQ lost 78% of its value.
  • From October 2007 through November 2008 both the S&P and NASDAQ lost about half their value.

It took years for markets to recover from these losses. NASDAQ is still priced below its 2000 peak.

All of these corrections were preceded by large run-ups in the markets – some lasting several years. All of them! Before each correction, millions of investors were pouring money into the markets; and before each correction, almost none of those investors – or their advisors – had implemented the defensive tactics that would have saved them trillions of dollars collectively, and severe pain individually.

We’ve seen that while markets take years to rise – and while they continue to offer great potential – they can crumble in days – sometimes within hours.

We have learned that lesson. Keith will not invest his money in a manner that risks these types of losses. And he won’t invest yours that way either. He applies the same belt, suspenders and net for all of our clients at DeGreen Capital Management, adjusted for each client’s personal level of appropriate risk.

Yes, you should be invested – but only in a manner consistent with your appropriate level of risk, and only where you know – where you know – that someone has your back. Click here to get started.

Here’s how we strive to minimize your risk…

Cash

First, we treat cash as an asset class and rotate to it when things get dicey. Our more aggressive portfolios will typically be more fully invested, and hold less cash, than our more conservative portfolios. But we may go entirely to cash in all portfolios if necessary.

Then We Use a Belt, Suspenders and a Net…

  1. The Belt. Sophisticated use of our proprietary longer-term fundamental- plus ongoing technical analysis to find today’s best opportunities. Avoids markets where current “risk barometer” is high, and rotates us into markets and sectors that appear most promising.
  2. The Suspenders. Sophisticated, proprietary short-term fundamental analysis to guard against “stealth” declines in earnings or other factors. This complex analysis measures, among other things, the percentage increase or decrease of shorter-term earnings estimates on a daily or weekly basis.
  3. The Net. Strategic use of emergency stop loss orders to guard against sudden, steep declines. The more conservative the portfolio, the higher the net. Our stop losses have never been triggered because we strive to closely monitor your portfolio every day. However, they are there in the event of an emergency to help ensure that we are among the first out of suddenly-declining markets.

Keith will discuss these more fully with you at your Personal Investment Suitability Interview, at our public seminars, and at our client conferences (Once you become a client!). Click here to get started.

The Takeaway:

In our opinion, exchange-traded funds (ETFs), offer a superior alternative to either mutual funds or individual stocks or bonds; AND they can be effectively managed to minimize your risk along the way.