If you can’t make heads or tails out of stock fluctuations these days, adviser and wealth manager Tim Collins is right there with you.
In a recent column on Real Money, Collins writes:
[M]y portfolio feels like I'm herding cats. Nothing is behaving like it should and if I don't get it under control soon my family room is going to get destroyed and I'm going to be left with nothing but worthless trash. That's my concern with chasing too much here. You're either in the right place and catch something big or play for a quick intraday flip and maintain a small runner overnight. Otherwise, you'll end up starting the day with hopped-up kitties ready to go crazy in your portfolio.
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“We, well, many of us, have gone from making stupid people famous to making worthless companies valuable,” Collins writes. “To be fair, I should say making companies overvalued.”
This isn’t a market for consistent value, nor even for trades that make sense on their fundamentals. But if traders can’t follow trend lines in the data, and if a single tweet can move stock prices more than an earnings report, how can investors know what to do with their money?
With three rules, Collins says: Risk management. Risk management. And more risk management.
Right now investors are making a fortune on meme-based trading, speculation assets like Bitcoin, and companies whose stock price seems unrelated to corporate activity. This is a great market for investors with a little bit of capital to burn. However, the single best thing you can do for yourself is keep your serious money safe from the madness.
Because even though no one knows when the craziness will end, it eventually will. Through good risk management, you can make sure that your portfolio doesn’t take a hit when it does. Read more of Tim’s thoughts on the market crazies and your own money right here.