Safeguarding Your Investments

Last ??month?? I talked about “Benefits Of A Low Risk Investment”, this time I want to talk to you about Safeguarding Your Investments to minimize your loss risk. While you are subject to much greater risk with investments when compared to bonds, there is a way you can protect yourself from serious losses. That protection is the use of triggers.

In “Benefits Of A Low Risk Investment” I used the following example:

Let’s say you have $10,000 in extra cash. Someone suggest to play it save and get into a high-yield savings or bond that produce 5% a year, yet you receive some seperate advice to play with some risk and invest into the stock market. Let’s take an example over a 2 year period. The very first year you invest into the stock market you make a whopping 50% on your cash off of a great bull market. Sounds great doesn’t it? The next year due to fluctuation, the market falls a bit and you lose 35% on your money.

We came out with these results:

If you have $10,000 and make 50% in the first year, you’ll have $15,000 by the end of that year. However, if you lose 35% of that $15,000, you’ll end the year with $9,750. That’s a total loss of $250 (estimated -2.57%) of your original $10,000 investment.

Now let’s take an example when you use triggers to help safeguard your investments from serious losses:

Let’s say when you invest you have $10,000 into the stock market, you set triggers to sell at an 10% drop at anytime (I actually use a lower number than that, but I’m using 10% to keep the math easier). On that first year, you make that same 50% and you’re looking at a $15,000 portfolio at the end of the year. Now due to market fluctuation, your portfolio drop, but rather than losing 35%, your trigger protects you from losses and you cash out after a 10% loss. That will only drop you down to $13,500. Much better than $9,750 from our previous example and it even outperforms the $11,025 of the high yield example.

I’ll talk more about triggers, but remember, to help control emotions, such as fear and stress, the use of triggers is another good technique to use to keep yourself from looking at your investments every 10 or 20 minutes.

Free PDF E-Book Downloadable Get your free bonus downloadable copy of “Avoiding Financial Setbacks” today! Click HERE To Learn More

<center>© Anthoney Grigsby - visit HelpMyCashGrow.com for more great content.</center>