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20-10-2023, 08:30 AM
If you are a stock trader, your risk mitigation measures focus on stop-losses and position sizing/money management.
But I am a fundamental investor with holding periods of 5 years or more. What works for a stock trader does not work for me.
I have a 3 level approach to manage investment risk in the stock market.
![[Image: Chart-4-Risk-mitigation-strategies.png]](https://i.postimg.cc/ZK8tmsm8/Chart-4-Risk-mitigation-strategies.png)
In the chart, the first two columns denote the various causes of risk – main causes and sub-causes. The next 3 columns denote the type of mitigation measures – avoid, reduce or accept.
Each row summarizes the measures for each of the cause identified.
I update this regularly and I would like to think that it is comprehensive. But if you see any loopholes, do let me know.
If you want to know more go to “How to mitigate permanent loss of capital in an awesome way”
But I am a fundamental investor with holding periods of 5 years or more. What works for a stock trader does not work for me.
I have a 3 level approach to manage investment risk in the stock market.
- First determine the amount of my net worth to be allocated to stocks. I use the 3 Bucket approach and it works out to be about 30%.
- Next I have a 30 stocks portfolio chosen based on value investing principles.
- At the individual stock level, I have a host of measures that came for careful analysis of each of the threats than can lead to a permanent loss of capital. These are summarized in the chart below
In the chart, the first two columns denote the various causes of risk – main causes and sub-causes. The next 3 columns denote the type of mitigation measures – avoid, reduce or accept.
Each row summarizes the measures for each of the cause identified.
I update this regularly and I would like to think that it is comprehensive. But if you see any loopholes, do let me know.
If you want to know more go to “How to mitigate permanent loss of capital in an awesome way”