How to Bulletproof Your Stock Portfolio
This article today I’d like to talk about several tips, tricks, and tactics that almost anybody can use to bulletproof their stock portfolio.
We are in the midst of one of the worst recessions in the history of the world. When it hit towards the end of 2008, none of us really expected it to be going so strong still in 2010 but it has. Many investors, especially smaller investors have been hit especially hard. Fortunately, there are things you can do to help bulletproof your stock portfolio to make sure your investments aren’t hit as hard as they could have been.
When times get tough, like they are now, many investors think that they should simply sell all their stocks and wait for things to turn around but this may not be the most beneficial strategy to follow. If the stock market drops and then you sell your stocks, you miss out on the rebound!
In fact when the stock market drops, it may be the best time to buy because you can buy the same stock that you already owned at a much cheaper price and when you average out the cost of the cheaper stocks with the cost of the stock that you originally purchased, you get a much lower cost basis in the stock which means you have a potentially greater upside. This strategy is called dollar cost averaging and the smartest investors have been doing it for a long as there has been a stock market.
One way to make sure you don’t get hit quite as hard when there is a downturn is to stay diversified. You should usually diversify your stock portfolio between domestic stocks and international stocks and also bonds and other holdings such as gold or other precious metals. How you divide up your diversification depends on many different things including your age and time till retirement as well as risk aversion.
If you are younger and therefore less risk-averse because if something goes wrong you have plenty of time to start over again, you may weight much of your portfolio in domestic stocks and less in foreign stocks and bonds. On the other hand if you are an older individual who is more risk-averse because you don’t have a lot of time to make up if something goes wrong, you may want to diversify more into stable government bonds and less into domestic stocks.
Finally, set up a system to automatically invest a set amount of money every single month no matter what the stock market is doing. Many employers allow direct deposit of part of your paycheck directly into an investment account and I suggest you do this because it will mathematically help even out your portfolio because you will be automatically purchasing when the stock market goes up as well as when it goes down, creating a smoother averaging mechanism.
So there you have several very simple tips and tricks that anybody can use to help will prove their stock portfolio so that they don’t lose much money when things go bad.
Rick Brunting runs a stainless steel grills web site where he also reviews the best tec gas grills for your deck or patio. He has been an article writer online for well over 5 years and also enjoys fishing and basketball.
Tags: Bulletproof, Portfolio, Stock
View this post on my blog: http://stocktips.valuegov.com/how-to-bulletproof-your-stock-portfolio/
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