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News & Opinions


Weekly Editorial - R I S K; The 4 letter word that should be welcomed in your investment vocabulary

Let's be honest, when the word risk or even worse, high risk, is mentioned among a group of investors you can bet, especially in this current market, that most are grabbing for their antacids. We are a society that has become terrified of risk, and in the process we have lost the necessary edge needed to achieve the growth we want in our portfolios. A good friend once told me that the only emotion more contagious than enthusiasm is fear, and right now everywhere you turn that is exactly what you are seeing, fear, fear that has caused many investors a lot of heartache... If the past is any indication of the future now is the time to capitalize on this fear. There are countless stories of investors and like-minded individuals that have made their fortunes during economic downturns very similar to the one we are in right now.

The big challenge that we face is that for years we have been conditioned to simply turn over our hard earned money to so call "experts" and have no involvement other than reading a quarterly or yearly statement. If you are like me, I have sat in front of many so called "financial planners". In reality most of these planners had no planning skills at all! They ended up being no more than glorified sales people promoting their particular mutual fund or insurance. Don't get me wrong these financial products are needed; we all use these to some degree, however for years many of us have been led to believe that these were secure investments. Anyone watching the Dow, S&P, and Nasdaq is currently seeing how secure a 30% draw down really is.

So what is the answer? First we need look at our investment potential and ask ourselves how much can we really invest. Next we need to sit down and allocate a fixed percentage to high risk and secure investments. One example of this might be 10% high risk and 90% in a portfolio of secured investments. A secure investment is one with a fixed guaranteed return such as a Government bond. I know many of you reading are not that enthusiastic about a 2% return, however if you can achieve a 200% return on your high risk portfolio it will more than make up for it. Let's take a look at one example.

Johnny Capital has $100,000; $90,000 is placed in a guaranteed investment getting a fixed return of 2% annually. ($1800) Johnny then places the remaining $10.000 into a high risk portfolio returning him 200% over the same time period. ($20,000) For the year Johnny Capital nets out with a 22% return. Let's look at this from the absolute worst case scenario. Johnny's high risk investment goes south. He loses it all. For the year he is still only down 8.2% ($100,000 +$1800- $10,000 = $91,200).

Now the question remains; where do we find a good high risk investment? This is where this author personally chooses FOREX. With FOREX there is always an opportunity to profit regardless of the overall market condition as money can be made in both bull and bear markets. As currencies are traded in pairs one is always going up in relation to the other. Also, the leverage that can be used allows for above average portfolio growth. With a relatively small amount of investment it is possible for better then average returns.

Another advantage of FOREX is its hours of operation. From the time it opens on Sunday to the time it closes on Friday, trades can happen at anytime. Unfortunately I do not have the time or desire to sit in front of a computer screen and monitor these currency pairs 24 hours a day. I have found that the way around this is to place my funds with a well seasoned account manager. I do suggest however that when going with an account manager one should be able to ask for and receive a complete record of historical transactions with LIVE money from the account manager. Also I would recommend checking to see how accessible the account manager is to answer questions and providing good service.

Now each person is open to their own methods of achieving high risk and high growth. If you are able to allocate a certain percentage of your capital to high risk and find something that you feel comfortable with, your chances of prosperity will no doubt increase, and when you speak of the 4 letter word risk you can put your worries to rest. Good Luck and good Trading.

Market News - Bailing out the "Big 3"

Article coming soon...

 

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PREVIOUS MONTHS

October Performance:
Fund Growth : 101.2%

November Performance:
Fund Growth : 96.0%

December Performance:
Fund Growth : 55.6%

 

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