Six Things To Do In A High Risk Market

When the market turns against you, what should you do? Sell
everything? We discussed that choice in a recent column Selling
everything draws your “line in the sand” and announces that you
have determined there is no future for you in the market
There are other steps you can take when things start moving
against you Here are 6 actions you take today to help protect
the money you’ve worked hard to get In my next article, I will
share several more ways you can help protect your stock market
and mutual fund investments
1 Decide at what price you will buy the stock or fund if it
pulls back Take a long look at where the stock has been the
last few months Has it gone up without any kind of break? It
may be due for a pullback WRITE DOWN your reasons for buying
and the ideal price you’d like to own it atand be patient If
you miss it, you miss it Don’t chase stocks
2 Manage your stops Re-examine where your stop orders are and
decide if you can live with getting stopped out These days,
stop orders usually need to be renewed or revised every 60 days
If your stock has moved up nicely of late, you should move your
stop up as well
3 Buy puts on stocks You may own a stock where you have a
profit You may really have no intention of selling the stock
soon But you know that the individual stock may have gone up
too far, too fast Buy a put on the position It is considered
protection on your original investment If the stock falls, the
puts should climb in value This will offset the drop you have
(on paper) in the underlying stock And if you’re right, and
take a profit in the put, you may have enough cash from the put
sale to buy more shares of that stock at a good price, now that
it has dropped
4 Buy half of what you would normally buy You want to tread
lightly in markets when the risk is high Buy half of what you’d
normally think of doing You’re automatically keeping more cash
than usual on the sidelines, which is smart decision in a risky
market
5 Invest in a basket instead of an individual stock
Exchange-traded funds are a great way to do this If you feel
strongly that a current theme will work, but are unsure about
the market, this may be your ticket Thinking about swapping a
single stock for a basket You’ll get diversified since you own
a basket of names instead of one single stock
6 When stocks start to fall, think about selling stocks short
It’s not for the faint of heart, since being “short” leaves you
on the hook, because your loss is unlimited But remember,
stocks don’t just go in one direction What makes it an
interesting market is that stocks go up AND down
One decision you won’t see on the list is the choice to do
nothing, and just “sit it out” or ride it out You’ve worked
hard to get where you are financially, the last thing you should
do is sit idle and let the market take your profits away from
you
There are other methods you can employ to help reduce the risk
in your account, which we will get into in the next article In
the meantime, feel free to contact us, toll-free, at
877-223-7300 if you would like further information on how to
protect your assets in a high risk market

Tags | chase, decision, ins, line, market, result, risk, sidelines