Nobody can tell which way the markets will move. How do you survive market moves? You hedge your bets. That goes for professionals and responsible investors.
Markets present opportunities for any person to participate in owning or lending money to the producers of our own goods and services. Producing products and services is our collective livelihood. Their total value represents our wealth.
In addition to earning our own working income, we can easily expand our own wealth – our savings- by helping others through taking part in the market industry. The market industry compensates us for that use of our money and for the increased value of the products and services produced.
However the requirement for products and services changes for various reasons along with complex ways. Alterations in unemployment, rates, fads and fashion, technological capabilities, international worries and weather are examples that influence demand – and the requirement for some goods and services versus others.
Anticipating what changes will be ready to occur and just how they’ll affect the companies are quite challenging – or impossible. Though the markets can change – quickly or slowly – and that creates opportunity to generate profits – big bucks – from the markets.
Professionals count on market moves – up or down – to make money. They will often bet on ‘up’ and can hedge their bet by an offsetting bet on ‘not up’ or simply just ‘down’. They’ll let their winnings grow but keep any losses small. They know that putting almost all their eggs in a basket (down or up) is a prescription for financial suicide.
The common investor doesn’t always have time for you to play every little market move. He requires a long term view to investing. He must last over the markets’ bull and bear cycles – cycles whose beginnings and endings are known only in hindsight.
An intelligent investor watches the markets which is ready to make adjustments or set stop losses where they can. But he balances his portfolio anywhere between equity investments and income investments in accordance with his investment horizon time, which depends on his age, as being a hedge against sudden and prolonged market moves.
During bull markets his equity investments grow. In bear markets hopefully his equity doesn’t lose excessive or he stops out before excessive losses. But his income investments pay him money in either a bull or bear market. He or she lose some gain in those bull markets because of not having all his eggs in one basket – the equity a part of his basket – if the market goes south, he doesn’t lose his whole basket of eggs.
Help you prepare portfolio (basket) balance so market moves – unpredictable because they are – won’t destroy it. And keep it balanced in order that it can continue to serve the needs you have.