What to Do When You Get It Wrong

If anyone promises you that they have a trading strategy that can guarantee 100% winners... run.

No investor – no matter how good they are – can win all of the time.

Losing trades are inevitable. And that's why any good investor knows that you can keep losses 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, a year, or 10 years from now. What I can do is give you the information and resources you need 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 we miss the boat on buying or selling.

But our corporate affiliate TradeSmith just unveiled a service, Trade360, that provides 360-degree support for your overall financial well-being.

Trade360 shows you how to get into stocks before they climb. It also protects your money from major downturns, giving you the chance to avoid suffering bigger losses.

It's a simple way to get your exit plan ready while setting yourself up to profit when stocks are set to rise.

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Now, here are some of the things on your minds this week... Keep sending your comments, questions, and topic suggestions to [email protected]. We read every e-mail.

Q: Besides taking Lipitor, are there any supplements that can help reduce cholesterol? – M.K.

A: We're not in the habit of recommending supplements. But there are lots of foods and lifestyle changes that help reduce cholesterol naturally...

Some foods that lower cholesterol include olive oil, green tea, and mushrooms.

A calorie-restrictive diet, like a fasting diet, also lowers your cholesterol. Researchers have studied calorie restriction in mice and rats, but one small human study really caught our attention. Published in the journal PNAS, this study looked at the lipid profiles for 18 people before and after they practiced calorie restriction. Some of these folks had stuck to the fasting diet for up to 15 years. Researchers also looked at their C-reactive protein reading, which measures levels of chronic inflammation.

What they found was that caloric restriction led to lower cholesterol levels, improved blood pressure levels, and lower levels of inflammation.

Another way to lower cholesterol is with high-intensity interval training ("HIIT"), my favorite fitness method. One study from the University of Oklahoma Health Sciences Center showed that just eight weeks of HIIT increased high-density lipoprotein (the "good cholesterol," or HDL) levels in participants. That's good since HDL helps capture low-density lipoprotein (the "bad cholesterol," or LDL) in our blood and take it back to our livers.

Before turning to pills, try these methods first. And if fasting and fitness don't help enough, I recommend asking your doctor about the least intensive medication to get your cholesterol where you need it.

Q: When you talk about having "chaos hedges," is gold or silver better? – J.H.

A: Longtime readers know I recommend keeping a portion of your wealth (somewhere between 1% and 15%) in chaos hedges. These are hard assets like gold, silver, timber, and even farmland that historically provide comfort and protection during rough political and economic times. Often, we see the prices of gold and silver rise as stocks fall.

I typically recommend a mix of both gold and silver, but it depends on what kind of chaos you want to prepare for. If you're worried about a total societal collapse where you'd need something to use as currency, silver coins are your best bet. The price of an ounce of silver is a fraction of the price of gold (about $20 versus $1,700, as I write). So it's easier to break down into manageable pieces to buy what you'd need.

One warning, though... The value of these more commodity-like assets can change quickly. Take the collapse of gold in 1980 when it fell 40% in just two months. That's why I urge people to hold only a small portion of their assets in these sorts of hedges. And silver prices tend to be more volatile than gold – typically rising faster than gold when both are doing well and falling faster when both precious metals are struggling.

Q: I'm somewhat sure that you have covered memory loss in the past. But I forgot when. Please comment! – G.F.

A: We've written quite a bit on memory loss as it pertains to Alzheimer's and dementia over the years. Here's a selection:

The No. 1 Test to Get After a Dementia Diagnosis
Ignoring This Common Problem Could Trigger Dementia
Bend Your Way to a Better Brain

We've also talked about memory loss more generally – for example, how memory loss is often a side effect of statins and sleeping pills.

If you have more questions on memory loss or a specific topic we haven't covered, send it our way.

What We're Reading...

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
October 7, 2022