Volkmar Hable is pretty bearish on the market, and has been for some time. But that’s not the point I’d like you to take away from his column this week.
You can be bullish if you’d like, or you can be bearish as all get-out, it doesn’t matter. You still have to understand, and implement, a plan of risk management:
I had an extraordinarily funny comment by an angry reader last week who suggested that FTSE and DAX should reach 30,000 respectively. The reason for her anger: her investment advisors believes in that obviously extremely bullish scenario and invested all her savings into long positions. She continued that my - quote: “…warnings of an impending decline makes her so nervous that she cannot sleep anymore and that I should stop writing such frightening and stupid things…” Apart from the obviously very risky assumption of a strong rally next year, her comments reflect a complete lack of risk management, which is the reason that I am mentioning this issue anyway in this week’s investment Commentary. I have had repeatedly questions concerning “how much money” one should invest, and I would like to answer this collectively here…
Read his response to the reader, and realize that you, too, must have a plan. It’s great when things are going your way. But when they’re not, you have to know what you’re going to do to stay in the game. Remember: Never lose big.
One should never risk his/her your hard earned money with foolish assumptions on possible phantasy profits. If you do, you will be a sitting duck for the mother of all losses.
