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Published On: Thu, Oct 8th, 2015

Private Investors Can Weather The Storm In Stock Markets

There are a range of potential reasons behind the recent turmoil in the world’s major stock markets. Between ever growing government debt in Europe, a slowdown in China and falling commodities prices, there are many reasons for private investors to be wary.

The question really is whether or not you are personally worried about your own portfolio and assets.

Human nature makes many of us pursue growth and gains in an almost maniacal way. We all want a short-cut to fame and fortune. However, the reality is that most families are quite content with an annual return that ticks gently along. In fact, reducing risk and volatility ought to be the factors that most people actually focus on.

For example, while researching this article your author discussed the recent stock market swings with a friend that is an early retired professional investor. It turned out that despite many conversations earlier in the year about the height of the market, he was “all in” NASDAQ and is currently nursing some heavy losses in a few positions. In fact, he told me that his investment partner (his father) had refused to get out of bed for three days because he was so traumatised by the wild swings in their portfolio of technology companies.

It would not take much to diversify out and reduce his risk, but like all investors, he believed he would be able to tell the top and get out appropriately. Needless to say, he has failed.

photo 401(K) 2012 via Flickr

photo 401(K) 2012 via Flickr

Legendary hedge fund manager Ray Dalio has been quoted as saying that if you split your investment savings – as most of us are told to do – equally between a stock and a bond fund, the risk will still be around ninety percent in the stocks fund. Clearly most of us, including many financial advisors, need to start at the beginning and learn the basics of investment from sites like StockExchangeSecrets.com rather than focusing on the tips in the daily newspaper.

Dalio goes further and in his interviews with Tony Robbins (for his book, Money: Master The Game) explained that his ideal portfolio is designed to provide returns but with greatly reduced levels of risk and volatility. To balance the potential risks of different economic environments, he uses a mix of stock market, bond and commodity investments. A process of regular rebalancing completes the job.

While in reality this is not easy for an average small investor to mimic with a limited monthly savings budget, the reality is that it is very within the range of options and skills of more advanced and wealthier individuals. For many of the world’s wealthiest people – Ray Dalio only works with the very rich – this level and insight in the management of their money helps to answer the question above. No, they are not overly worried about the performance of their portfolios.

Dalio calls this his All Weather portfolio, because he does not know what the economic weather will be like tomorrow, so rather than guess, he balances his portfolio to prepare for most eventualities.

Will you take the steps you need to capture stock market gains, but also reduce your risks at the same time? It might make it easier to get out of bed the next time stock markets tank.

Guest Author: Stuart Langridge

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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  1. Stocks And Bonds Game Ebay | Great Stock Market Futures says:

    […] Private Investors Can Weather The Storm In Stock Markets – Master The Game) explained that his ideal portfolio is designed to provide returns but with greatly reduced levels of risk and volatility. To balance the potential risks of different economic environments, he uses a mix of … […]

  2. Owning Us Stocks In A Tfsa | Best Stock Market Futures says:

    […] Private Investors Can Weather The Storm In Stock Markets – There are a range of potential reasons behind the recent turmoil in the world’s major stock markets … or not you are personally worried about your own portfolio and assets. Human nature makes many of us pursue … […]

  3. Private Investors Can Weather The Storm In Stock Markets - News Aggregator says:

    […] Read more at The Global Dispatch Related News Global stock markets waver as Fed decision nears SEOUL, South Korea (AP) — Global stock markets meandered Thursday ahead of the Federal Reserve's announcement on whether it would raise U.S. interest rates for the first time in nearly … READ MORE Asian stock markets higher, Japan gains on stimulus hopes SEOUL, South Korea (AP) — Asian stock markets bounced higher Wednesday, led by gains in Japan where investors were buoyed by expectations for more economic stimulus.KEEPING SCORE: Japan's Nikkei … READ MORE Tom Phillips: Investors need diversification to shrink risks in stock market By TOM PHILLIPS For The OklahomanIn the past eight years, and amid a recession, Netflix stock soared more than 3,000 percent to last week's close at $102.24.Read more on NewsOK.comRead … READ MORE Riding The Wall Street Roller Coaster: Ups and Downs Of The Stock Market [Infographic] With all of its ups and downs, the stock market could easily be compared to a runaway roller coaster, and this isn’t anything new. Wall Street has been this way … READ MORE Investors Bought Into Nearly $250 Billion in Global I.P.O.s in 2014 Even excluding the $25 billion Alibaba offering, a phenomenon in its own right, the value of worldwide initial public offerings was up nearly 36 percent over 2013. Source:: Investors Bought … READ MORE Global markets steady after rout extended into Asia LONDON (AP) — European stock markets recovered their poise Tuesday despite an earlier rout in Asia which featured a 4 percent slide in Japan's main index.KEEPING SCORE: In Europe, Germany's … READ MORE Chinese manufacturing figures shore up global markets LONDON (AP) — Solid Chinese manufacturing figures helped shore up stock markets around the world Thursday ahead of a run of U.S. economic data that could go a long way … READ MORE Chinese stocks lead markets higher as Fed decision looms LONDON (AP) — A near 5 percent surge in China's main stock index helped shore up markets around the world Wednesday as investors get ready for the U.S. Federal Reserve's … READ MORE Global stock markets waver as Fed decision nears Asian stock markets higher, Japan gains on stimulus Tom Phillips: Investors need diversification to shrink risks Riding The Wall Street Roller Coaster: Ups and Investors Bought Into Nearly $250 Billion in Global Global markets steady after rout extended into Asia Chinese manufacturing figures shore up global markets Chinese stocks lead markets higher as Fed decision var hupso_services_c=new Array("twitter","facebook_like","facebook_send","google");var hupso_counters_lang = "en_GB";var hupso_image_folder_url = "";var hupso_url_c="";var hupso_title_c="Private Investors Can Weather The Storm In Stock Markets"; […]

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