Making Money in Stocks

  • Print Article |
  • Send to a Friend |
  • |
  • Add to Google |

Is it true that high net worth investors focus only on generating the highest returns? No! The ultra-wealthy focus primarily on risk management. These people are not gamblers.

The old line from Mark Twain - you should be more concerned about the return OF your money than the return ON your money - is very accurate with this group.

The 2003 World Wealth Report (a product of Cap Gemini, Ernst & Young, and Merrill Lynch) showed that during 2002, when the S&P 500 got trashed for 22%, these "high net worth individuals" on average lost only 2.1%.

So how is it possible that the average investor got slammed - in most cases, for a lot more than 22% - but those folks with more than $1 million in financial assets barely had their first down year - after seven good years?

It is because they are conservative and focus on controlling the risk, not focusing on maximizing their return.

Their view is: any advisor we work with must have a discipline that avoids substantial erosion of capital (losing money).

But the typical marketing pitch of so many brokers and investment firms is "we can pick them better than you can." Without proper risk management, there is no point to that at all.

You can be "right" seven years in a row, but one or two disastrous years can wipe out all the gains you made over that time. That is exactly what happened to most investors between 2000 and 2002.

Look , you don't need to shoot the lights out year after year.

Getting consistent positive returns is actually more important than the size of the returns. Do not lose money, or at the least, keep the losses small! Compounding happens faster with consistent positive returns. That is the real secret of the millionaire.

Thomas Mullooly  is the owner of Mullooly Asset Management, LLC, NJ Fee Only Investment Advisor, providing guidance for your 401k account. Mullooly Asset is a fee-only alternative to stockbrokers and financial planners.

Tom's popular email alerts help folks to reduce the risks in their portfolios. To learn how to stop making investing mistakes or if you would like a free look at your 401k account at work - or your 403b annuity, or section 457 deferred compensation plan at work, visit www.mullooly.net today!

Rate this Article:
  • Article Word Count: 295
  • |
  • Total Views: 26
  • |
  • permalink
  • Print Article |
  • Send to a Friend |
  • |
  • Add to Google |
>