(This is not Turtle Trader or Trend Following blog. All stock and strategy mentioned in this blog do not represent buy or sell. This is my digital diary to express my thoughts and opinions about the world of investing. Ultimately, you will be responsible for your own decision. Please consult your investment adviser before taking any investment position).
Wednesday, June 17, 2009
Key test: can you sleep well at night
JP Morgan used to have a friend that so worried about his stock holding. He asked him "what should I do ?" He replied "Go and sell your stocks". A few days later, his friend still asked him the same question, his reply was simple " Go and sell your stocks". The frustrated and worried friend asked him what was his point. You need sell down your stock to your sleeping point to match your risk tolerance. If you have taken too much risks, then reduce it to a point that you can sleep soundly at night. I am not suggesting you should or should not do it, only you yourself know what is your risk tolerance. I still can sleep well though the markets are correcting so there is no real concern yet and I know I have not taken excessive risks.
For the same reason, it is extremely difficult to advise others on investing without knowing the risk they are able to tolerate. A high networth investor can take a bigger bet without much anxiety than one with lesser wealth. Also those with a gain has a buffer in their portfolio allowing them to tolerate risk and volatility better than those with a loss. There are many other situations one can think of too. Cheers.
ReplyDeleterisk is relative to quantum of investment made.
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