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Managing your risks

By Edited Apr 28, 2014 3 1

Make the right investments

Future benefits all happen due to making the right choices now.  At the risk of sounding older than I am really am I’ll state in this day and age the markets are insane.  Some of the best pre-planning will still carry risks and in turn could turn into a loss.  However, if you protect your money you can help minimize the risks.

Mix it up.

My wife and I are on different ends of the spectrum when it comes to risk tolerance and the stock market.  My motto is no risk, no reward.  Her motto is slow and steady wins the race.  The truth is a balanced approach helps everyone.  In other words, mix it up.  You never want to put all your eggs in one basket.

High Risk stocks:

These are stocks are very unpredictable.  Some types of high-risk stocks are new companies and often drive higher prices up front and an increase to you as an investor for loss on your investment.  However, these are also the stocks that tend to drive the highest reward factor.  For example, Google would have been labeled as high risk back in 2004 when it opened at $85 a share.  As of this writing, Google was trading at $591.53 or an increase of 695.91%.  100 shares at IPO price would have earned you a profit of $50,633 or more depending on when you sold.  

Mid-Risk Stocks (Also called Large Cap Stocks).

These are stocks that are going to offer a safer holding for your investment and most commonly offer a high quarterly dividend.   The way I explained these to my wife(and mother) is easy, think of Warren Buffett.  The idea here isn’t about high returns; it’s about compounding your money as often as possible.  (Think of Coca-Cola and Walmart).  

Low Rick Stocks

These are the “safest” of all stocks.  Very easy examples of these are US Treasury bonds.  They are often considered one of the safest investments.  However, when compared to High and Mid risk investments they have the lowest return.  (Like a piggy bank that gives you a penny every now and then).

The Magic Ratio?

I don’t know the "Magic" ratio, and I am not sure anyone truly does.  The important thing to take away is balance.  You can put all your money into one bucket but you have risks to ALL areas.  Loss of money, or not making enough money to beat out inflation; each of these are very bad situations.   I wish everyone the best of luck and happy investing!

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Comments

Nov 4, 2012 11:26am
Ernie
Very valuable tips! Thumbs up for your article.
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