$100,000 question

The stock market is an arena that gives investors the opportunity to earn a return on their investments through capital appreciation, earnings growth, and dividends. Buy and Hold investing has evolved over the years through Investment companies that offer vast amounts of products that assist investors to achieve their investment objectives through diversification and proper portfolio allocation.

The listed derivatives markets came about as part of the evolution of the investment world, and were created with the primary purpose of responsible management of riskin a portfolio.

Buy, Hold, and possibly Hedge. Put your money in the market, and take it out in 30 years when you retire. This concept has been presented by the financial services community and accepted by investors.

Put $x.xx amount of money into the market per month/quarter/year and you will likely earn a x% gain per year, compound the earnings, keep investing, and when you are ready to take your money out it will be worth x% more.

We have been trained to think this way.It makes sense, and honestlywho would be likely to invest in something if it were presented to a potential investor that there isapotential for loss. If there were potential for loss, then why would you even consider it. The potential for loss is disclosed, but rarely discussed.

Investors should not be concerned with how much they can make when they make an investment–The $100,000 question that needs to be asked before you invest in anything is–

Once you have established a suitable answer to this question, you will begin your journey into seeking the investments and opportunities that are best suited for you.

Here are some pointers to consider when you ask yourself, or the person you are considering investing with:

1. Consider Absolute Risks vs. Perceived Risks

2. Gain an understanding of the absolute risks of all the security types you are considering investing in

3. Gain an understanding of the relationship between risk/reward

4. Gain an understanding of your personal limitations in investing

5. Invest with or become an experienced risk manager

(These are just a few considerations, if you have any questions or would like some more specific examples please feel free to give me a call.)

The ‘shake-up’ in the investment world over the course of the past 18 months, I fear, has given investors cause to ‘give-up’, but I am a firm believer that the market has and will continue to work for those that approach it after asking themselves the $100,000 question.