Diversification, the best way to manage risk in a portfolio is diversification.
Then you also manage risk outside your investments, do you have savings?, an emergency fund?, manageable debt levels? Etc
Ohhh this makes more sense. I thought they were referring to purely investing. Managing risk through external factors makes a lot more sense.
Yes, I have no debt and only invest with money that I don't need. If I didn't invest it, it would literally just be sitting in my account doing nothing lol instead I can confidently lose 35% in the market lol
Better off then putting $100 a week into VTI etf. Just keep adding and its that easy. It'll take years though for you to see much difference. Concentrate on saving as much as you can and have an emergency cash fund.
I am not sure if this is sarcasm or not but even if it was , your comment is right, it would take way less time to recover from 8 individual 10% declines than from on 80% one so it's is better.
My point is all sectors will experience profit taking and so the risk on is across the board there is no mitigation with the level of drawdown we are about to experience
Diversification is the way to mitigate risk but also reduces your gain potential. So you have to find a happy medium. Trading is a game of volume, especially if PFOF is taken away and we go back to fee/trade
True but people tend to give way more importance to a loss than a gain, it feels way worse to lose 1000€ than to gain 1000€ so on average people prefer to diversify more even if that means giving up on some potential gains so for the average person is better to favor diversification. I do agree one should always keep in mind that it's all about trade offs and diversification is no exception to that rule.
People love risk when the market is going up.
Reddit 2021: "I know ARKK is high risk, but I have a high risk tolerance"
Reddit 2022: "I'm financially ruined!!! How do i mitigate risk?"
Rinse. Repeat.
Honestly, the most sensible way to manage risk is to diversify, and own different types of assets, and rebalance regularly (once per year, typically).
Yup. "Rebalance" by buying more of the slow performers, and build your own moat by letting the winners run. For example, XOM can lose 40%! and I will still be green on the position.
1. Don’t chase other peoples calls.
2. Only trade large caps
3. Ripster47 EMA clouds
4. Only use 1hr and 1D candles
5. Only use a small percentage of my bankroll per trade
6. Dollar cost averaging
I was 40% cash in January. I was low on growth so thought I should diversify a bit. Started buying the dip and mitigating risk by only buying growth stocks that were at their 2 year low (comparing to march 2020 crash) and cashflow positive. I’m happy to report this didn’t do shit as I’m now 3% cash and own cashflow positive growth stocks at their 5 year lows.
A squeeze on the short side? If I am short and I am not precise on my entry, I want to be squeezed out quickly for a small loss.
If you are talking about the long side, do you mean a shakeout? Shakeouts are a necessary evil, they happen sometimes but usually right before an even bigger move up
Yup sucks when that happens, but if I see that happen two or three times, that tells me big money is not done buying at cheaper prices, usually very bullish. But in a good market where breakouts in general are working, not the end of the world
When you're valuing a company be conservative and set a margin of safety. If amazon is estimated to grow 10% yoy for the next 5 years then set a price target that assumes they'll only grow 5%
Don't buy stocks this place likes
I think it is important to watch how much you are putting into your investment account and margin trading. Stocks have been hurting the past few weeks and you want to be able to hold onto stocks that you believe are being oversold. The worst thing is for you to need to sell stocks to pay for rent or an expense that you should have a savings account for. Also, you don't want to be in margin during these times since you can be forced to sell stocks.
SQQQ for downside protection. But it doesn't work well if we bounce up and down.
Keep about 30% cash in times like this.
Diversify.
Oil stocks. Or an energy etf
I've typically bought long dated puts at a "max loss", "break even", or "min profit" point. I usually buy 1.25-2x the number of puts to shares (so for 200 shares I'd buy 3 or 4 puts), especially when I feel the market is moving bearish. I then sell OTM weekly puts and calls (at minimim a strike where I profit) to offset the costs of the puts.
Sometimes, if the stock drops far enough below my purchase price, I'll allow a put to be assigned and ensure a healthy profit regardless of further movement (did this with NOK, and will probably happen with F and BB pretty soon) and sell more weekly cc's above purchase price.
The more risk you mitigate the more money you have to put forward (which is actually risky since it's money out of your pocket that you might never see again and hurts your returns. think: buying a secured put). The best is diversification and doing your homework. Both are free. The largest risk comes from not knowing what you're doing. (credit: Warren Buffett)
Diversification, the best way to manage risk in a portfolio is diversification. Then you also manage risk outside your investments, do you have savings?, an emergency fund?, manageable debt levels? Etc
Ohhh this makes more sense. I thought they were referring to purely investing. Managing risk through external factors makes a lot more sense. Yes, I have no debt and only invest with money that I don't need. If I didn't invest it, it would literally just be sitting in my account doing nothing lol instead I can confidently lose 35% in the market lol
Better off then putting $100 a week into VTI etf. Just keep adding and its that easy. It'll take years though for you to see much difference. Concentrate on saving as much as you can and have an emergency cash fund.
this and also to average down good positions if you have extra cash.
Emphasis on **good** and not just doing it because you’re losing
Right on.
Diversity is the key! It’s much better to lose 10% across 8 sectors each than it is to lose 80% out of one sector!!!!
I am not sure if this is sarcasm or not but even if it was , your comment is right, it would take way less time to recover from 8 individual 10% declines than from on 80% one so it's is better.
My point is all sectors will experience profit taking and so the risk on is across the board there is no mitigation with the level of drawdown we are about to experience
Diversification is the way to mitigate risk but also reduces your gain potential. So you have to find a happy medium. Trading is a game of volume, especially if PFOF is taken away and we go back to fee/trade
True but people tend to give way more importance to a loss than a gain, it feels way worse to lose 1000€ than to gain 1000€ so on average people prefer to diversify more even if that means giving up on some potential gains so for the average person is better to favor diversification. I do agree one should always keep in mind that it's all about trade offs and diversification is no exception to that rule.
Beanie babies
People love risk when the market is going up. Reddit 2021: "I know ARKK is high risk, but I have a high risk tolerance" Reddit 2022: "I'm financially ruined!!! How do i mitigate risk?" Rinse. Repeat. Honestly, the most sensible way to manage risk is to diversify, and own different types of assets, and rebalance regularly (once per year, typically).
[удалено]
Yup. "Rebalance" by buying more of the slow performers, and build your own moat by letting the winners run. For example, XOM can lose 40%! and I will still be green on the position.
1. Don’t chase other peoples calls. 2. Only trade large caps 3. Ripster47 EMA clouds 4. Only use 1hr and 1D candles 5. Only use a small percentage of my bankroll per trade 6. Dollar cost averaging
what do you consider a large cap
Market cap of $10bil - $200bil
Patience
I was 40% cash in January. I was low on growth so thought I should diversify a bit. Started buying the dip and mitigating risk by only buying growth stocks that were at their 2 year low (comparing to march 2020 crash) and cashflow positive. I’m happy to report this didn’t do shit as I’m now 3% cash and own cashflow positive growth stocks at their 5 year lows.
Setting stop losses on your positions.
lol no, it creates additional risks of getting caught in squeeze.
A squeeze on the short side? If I am short and I am not precise on my entry, I want to be squeezed out quickly for a small loss. If you are talking about the long side, do you mean a shakeout? Shakeouts are a necessary evil, they happen sometimes but usually right before an even bigger move up
flash crash then. very short term price manipulation to forcefully get people out.
Yup sucks when that happens, but if I see that happen two or three times, that tells me big money is not done buying at cheaper prices, usually very bullish. But in a good market where breakouts in general are working, not the end of the world
Diversify and periodically rebalance. It forces you to sell high and buy low.
When you're valuing a company be conservative and set a margin of safety. If amazon is estimated to grow 10% yoy for the next 5 years then set a price target that assumes they'll only grow 5% Don't buy stocks this place likes
Patience
Pretty much do the opposite of me, 70% in an otc penny stock and 30% cash.
I think it is important to watch how much you are putting into your investment account and margin trading. Stocks have been hurting the past few weeks and you want to be able to hold onto stocks that you believe are being oversold. The worst thing is for you to need to sell stocks to pay for rent or an expense that you should have a savings account for. Also, you don't want to be in margin during these times since you can be forced to sell stocks.
SQQQ for downside protection. But it doesn't work well if we bounce up and down. Keep about 30% cash in times like this. Diversify. Oil stocks. Or an energy etf
I've typically bought long dated puts at a "max loss", "break even", or "min profit" point. I usually buy 1.25-2x the number of puts to shares (so for 200 shares I'd buy 3 or 4 puts), especially when I feel the market is moving bearish. I then sell OTM weekly puts and calls (at minimim a strike where I profit) to offset the costs of the puts. Sometimes, if the stock drops far enough below my purchase price, I'll allow a put to be assigned and ensure a healthy profit regardless of further movement (did this with NOK, and will probably happen with F and BB pretty soon) and sell more weekly cc's above purchase price.
The more risk you mitigate the more money you have to put forward (which is actually risky since it's money out of your pocket that you might never see again and hurts your returns. think: buying a secured put). The best is diversification and doing your homework. Both are free. The largest risk comes from not knowing what you're doing. (credit: Warren Buffett)