If anyone promises you that they have a trading strategy that can guarantee 100% winners… run.
But while losing trades are inevitable, you can keep them from wrecking your portfolio with two simple (and easy) methods: using stop losses and following proper position-sizing advice.
In my Retirement Millionaire advisory, we regularly recommend you use stops of 20% to 25%.
Similarly, we “position size” by recommending that you never put more than 4% to 5% of your portfolio in any one investment recommendation (like a single stock or bond).
The combined strategies of trailing stops and smart position sizing ensure you never lose more than about 1% of your portfolio on any one investment… Whether you use a 5% position-size limit with a 20% stop or a 4% size limit with a 25% stop, both work out to be about 1% of your portfolio at risk.
You’ve heard me say it before: I don’t have a crystal ball. I can’t tell you exactly what the market is going to do a month from now, a year from now, or 10 years from now. What I can do is give you the information and resources you need to empower yourself to make the best decisions for yourself and protect yourself from an uncertain future.
Now, we all live full, busy lives. We don’t have time to watch our stops or stocks constantly. We’ve seen surveys where folks said that one reason they didn’t invest was a lack of time. Most of us worry we won’t be able to pay attention to our stocks on a regular basis and miss the boat on buying or selling.
Some folks point to the events of the last year as a reason to stay out of the market.
U.S. stocks hit their all-time high on February 19. Then the COVID-19 pandemic caused stocks to come crashing down… Over the following month, the S&P 500 Index fell 34%.
But we know that the stock market is one of the greatest ways to build our wealth. If you’re too worried about losing money, or that you won’t have time to track a stock portfolio, you’re missing out – and for no reason.
You just need to have an exit plan…
Right now, Steve is warning that most investors are going to miss the next big Melt Down in the market. According to Steve, “The Melt Down is coming, and you need to be ready… Luckily, securing an exit plan for the coming Melt Down isn’t hard. It’s easy.”
If your exit plan isn’t already in place, you need to see what Steve has to say… and make sure you’re ready for the worst. Click here to watch Steve’s message now.
After a two-week holiday break, we’re back with our usual Friday Q&A. As always, keep sending your questions, comments, and suggestions to [email protected]. We read every e-mail.
Q: Love your bulletins and advice. Could you provide me with what you would consider the best “Beginners” book on investing? My son has a 401(k) and is starting out and beginning to save for retirement. There seem to be too many choices out there beyond asset allocation. Thanks for your help. – F.K.
A: We might be a bit biased, but we’d strongly recommend a subscription to our flagship monthly newsletter, Retirement Millionaire. Don’t let the name fool you… In Retirement Millionaire, we give investment recommendations and advice that people of any age and investment ability can use. We even created a special report for subscribers called “Generational Retirement Plan: The No. 1 Thing You Need to Do to Retire Rich,” where we outline the keys to building wealth from your 20s through your 60s. Retirement Millionaire subscribers can click here to access it. You can get a subscription for yourself – or friends and family – right here.
In terms of books, we have a list of our favorites to help build financial literacy here. One of my favorite books for new investors is The Little Book of Common Sense Investing by John Bogle. It’s a great reference guide on index funds, exchange-traded funds (ETFs), and mutual funds. And he details how to avoid paying unnecessary fees. For a young investor just starting out, this book offers a great way to build a diversified portfolio without needing a lot of money.
Q: I love my Neti pot, but I don’t use the pot – I use the squeeze bottle; I find it is easier for me to use. My question goes to your advice to use a Neti pot “safely and correctly… in particular, use sterile water.” But what do you consider to be “sterile water?” Do you have to boil it? Or can you use distilled water like I do with my CPAP and Neti pot? Thank you. – B.W.
A: The distilled water you’re using is already just fine. What you need to avoid is plain tap water.
Although tap water is safe to drink, using it to clear your nasal passages gives bacteria a direct path to your brain. That’s why manufacturers warn that you should only use sterilized or distilled water in a Neti pot. You can purchase sterilized or distilled water at the grocery store for next to nothing. Or you can boil tap water to sterilize it at home, as long as you make sure it’s cooled down to lukewarm when you put it in your Neti pot.
Q: Can you provide me the link to the archived document that Dr. Eifrig wrote about how to and what questions to ask for end-of-life planning? I tried to search the data in my Retirement Millionaire account, but could not find it. Thank you. – V.V.
A: Discussing end-of-life care is one of the most difficult conversations many of us will have with our families. That’s why we’ve created a list of six questions you can use to kick-start the conversation, which you can read right here.
What We’re Reading…
- Did you miss it? Investing is an expensive education.
- Something different: 12 ways to improve your wellbeing this year.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 8, 2021