Money Management & Risk

The risk of doing nothing is great; you have simply got to do something.

The statement “no risk, no gain” is very true, but we should only take limited risks with our hard earned money. This is a low risk rule, not a no risk rule.

We all need to learn how to invest and to be actively investing for the long term.

Yes, of course there are risks; don’t let anyone convince you there are no risks, but the risks can be managed just like any other risk in life.

There are specific things we can do to avoid the main risks.

They are as follows :

  • Never invest more than 5% of your entire funds in a single company
  • Only invest in companies with average daily trading volumes of 500,000 or more, this indicates they are larger companies and we won’t have a problem selling them. It also indicates, they are liquid; the share price tends to move up and down each day. Less, traded companies can be static and then move up or down erratically
  • Larger, well established companies also tend not to have huge fluctuations in a single day. Rarely do larger companies drop 20% in a single trading day
  • Only invest in companies that have been trading for at least 10 years and have the data to prove it
  • Only invest in companies that have been paying a dividend for at least the previous 5 years
  • Don’t rush your decisions; it’s not a race, take your time
  • Be disciplined and controlled in your investing approach
  • Always remember – we are long term investors, not speculators
  • Learn the Back Office Investor rules and develop your skills and experience.