Taking risks, seeing opportunities and riding volatility
When we come to investing in the stock market, we can't never avoid risks and volatility.
We may need to define our own personal risk in the stock market. Every retail investor's personal definition of risk in the stock market may vary.
What is high risk to one retail investor may actually be low risk for another.retail investor. Risk in the stock market is very personal so we cannot anyhow imitate other retail investor's investing method and strategies without relating back to our risk profile.
Uncle8888's definition of his risk in the stock market
He defines his personal risk in the stock market as not losing part of his investing capital.
He will not risk more than 10% of his capital in any one stock no matter how attractive or "under-valued" that stock can be. He will also not expose more than 20% of his capital to any one sector. By limiting his risk exposure to stocks based on % to his investing capital he will ensure that his risk level is consistently maintained throughout his investing journey and market cycles.
Volatility and Risks
On the downside, volatility can cause him to lose part of his investing capital.
So how much will he lose in the worst case when he got it damn wrong?
He doesn't leverage so his loss should be around 10-20% of his investing capital when a particular stock or sector goes bankrupt!
Volatility and Opportunities
On the upside, volatility may made his dream of holding more multi-baggers come true.
Does it pay to ride volatility? The answer can be seen in his portfolio.
What is long-term investing means to retail investors like Uncle8888?
In one simple sentence: Long-term investing is someone who has gut and patience to manage his own personal risks to seize opportunities in creating wealth by riding the volatility across bull and bear market cycles.
Posts
No comments:
Post a Comment