May 15, 2010 at 06:35 AM EDT
Smart Portfolio Management III - The $1,000,000 Portfolio (Members Only)
You can’t lose what you don’t have . The reverse is true for people with Millions in a stock portfolio.  Phil points out that the reson you don’t run a large hedge fund trying to make 100% gains is that the people who invest in those funds are more interested in what we call "preservation of capital" rather than generating wealth.  Generally, the people who have $1M of investable cash to play the markets have already achieved a great deal of success, often by taking their own risks along the way.  For most of us, $1M is hard to come by and, while we want to put that money to work - we certainly don’t want it wondering off and joining the circus . As a high net-worth investor, you need to decide how to diversify your assets to suit your long-term goals.  We’re not going to get into that here - let’s just say that if you want to gamble and go for some of our " more exciting " plays, perhaps allocate a portion of the portfolio to those.  Whether that’s 5% or 10% or 30% is up to you but it is good to fence off your risk to a sensible, manageable amount that you really can afford to lose while keeping the bulk of your market allocation well diversified and well-hedged.  I have my own 5% Rule.  Phil’s famous 5% Rule deals with the predictable movement of stocks in their trading ranges but my 5% Rule, which Phil also agrees with is simply " Do not put more than 5% of your portfolio in the stock of any one company! ”   This is so much easier said than done for many reasons!! [1] Transition to Large Numbers Moving from a 5 or 6 figure account to a 7 figure account has a profound impact on many traders. In fact, our friend Dr. Brett refers to the effect “ performance anxiety ” can have on a portfolio and notes that one of the causes is the responsibility felt by traders as larger dollar amounts are traded.   Phil advocates a system of " purging " Short-Term Portfolio gains when they gets too large and shifting money into safer investments in a Long-Term Portfolio - it is good to have a strategy for balancing out your holdings, not just target goals . While it might be acceptable to put 15% of your $10,000 portfolio on that long call you just KNOW will make money, it would be a big No-No to consider the same percent allocation to such a…
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here