Making Risk Management a Priority

By admin
29 Mar

With the broad market taking a pause for a commercial break, it provides the opportunity to survey the landscape and make adjustments. The last two weeks have been a whirlwind of information, worries and speculation. The day to day hot spots change rapidly as the number of events to address continues to grow. For example, this time last week the debt crisis in Europe was the topic of choice, today it is the renewal of the tax cuts. The news is pushing money from sector to sector as investors attempt to chase and capture the sector momentum.

The last week has seen a rise in the financial stocks. We discussed this yesterday relative to the banks pushing financials higher. The banking sector has gained more than 12% and looks to push even higher with money flow gaining momentum. The sector has lagged the broad market, but is now playing catch up. We have added plays in the sector, but with the quick gains managing the risk becomes a priority.

Commodities such as crude have paused following a similar run to the upside. United States Crude Oil ETF (USO) hit some resistance at $38.50. With an entry at $35.50 and a reasonable gain over two weeks protecting against the downside is necessary. The big question mark revolves around the outlook for crude to move higher. If you believe their is more room to the upside set you stop wider and hang on, if you believe the run is done for the short term set your stop tighter. If you set a target at the November high take half off and let the other half run with a stop at $36.75. The point being manage the risk of the market relative to the position and the current risk. Nobody knows the future and risk management is about the present.

Semiconductors have been one of the primary leaders for the market. iShares Semiconductor ETF (SOXX) has continued to be in a solid uptrend off the August lows. The gain of better than 35% has been positive for any portfolio. Measure the risk relative to the current market environment and the probable outlook for the sector. Adjust your stop accordingly. The 30 day moving average has been a trendline for the sector and would be a good stop level for the position based on the current outlook. Again the focus is managing your risk actively now, not when the market corrects.

Energy is another sector making solid gains of the low in August. We took a play in iShares Oil Equipment and Services (IEZ). We have experience a nice gain in the play and believe the upside to the sector is still positive. However, with the current pause we see the potential pullback to support as a possibility, but what if the downside accelerates based on news, speculation or data? The 30 day moving average has provided a trendline for the sector and based on the positive outlook is a reasonable stop currently.

Risk management is a priority when it comes to successful money management. Every position in your portfolio demand that you manage the risk in accordance with today’s knowledge and foresight. Like all money management decisions, you will not be right 100% of the time, but you will sleep better and you will have control over your portfolio risk. Take the pause in the market as an opportunity to evaluate the risk level of your current portfolio and each position.

Categories : Money Management

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Money management is  about passion. As with anything in life, we are successful at the things we  have the most passion. Why? We are willing to invest time, energy, and effort  to achieve the end result. If you have heard me speak publically, or talked  with me individually, you know I am passionate about money management. One of my  primary goals in life has been to make money by removing the obstacles that  keep investors from achieving financial goals. The lack of passion is an  obstacle. Without passion we may know money is important and know we should  learn more about managing it, but we lack the desire to do so. Thus,  we procrastinate, or in our spare time we attempt to learn more  about the process. In the end, we either delegate the responsibility to  someone else or we do nothing at all. I cannot give you the passion to manage  your money, but I can give you the alternatives needed to accomplish the goal  of managing your money.

When asked the  question, "Do you manage money?" the simple answer is “Yes”. Money  Strategies was founded over 25 years ago on the premise of developing  strategies for money management that achieves a predefined goal. Sounds great,  doesn't it? The reality is Money Strategies is a money management firm focused  on making money for its clients. We have built disciplined strategies focused  on that primary objective. Those strategies are outlined on our websites and  you are welcome to review them at your leisure. Our goal is to manage money,  not markets, and by doing so we focus on risk management, which is as a flowery  way of saying we don't like to lose money.

I spent more than  twenty years of my career attempting to teach individuals, business owners, and  corporations how to plan for the long term. We designed elaborate financial  plans and business plans only to watch them accumulate dust. What I came to  realize over time was making money is the only goal that really matters. If you  make enough money over a period of time you can accomplish all of your  goals. When it comes right down to it, that's  all that really matters.

The key to any successful business  relationship is finding a person or company that is passionate about delivering  a service or product that meets your specific needs or desires. At Money  Strategies we are passionate about managing money to make money by avoiding  unnecessary risk. If you are passionate about making money with your money, but  lack the expertise, time, or passion, we may be the firm you want to talk with.

I understand we are  not right for everyone, but I also know that in a sea of minutia we are a  breath of fresh air. Our goals as a company are simple.  Our strategies for delivering money management  is simple, and we have fun doing what we do every day because we are passionate  about money management. If we are a fit for you, we look forward to speaking  and working with you. If we are not a fit for your needs, we hope you have  learned and benefitted from the experience of our workshops or websites.

Dare to Dream

Jim Farrish  Founder -Money  Strategies, Inc.

"The difference between a successful person and others is  not a lack of strength, not a lack of knowledge, but rather a lack of  will."   Vince Lombardi.