|
Your Objective Resource for
Global Financial Planning
and Wealth Protection
Risk
Management for Amateur Investors is Available OnLine!
All of our books and research reports
are available in our web based
Wealth Protection Research Library at a single price of $195. Save
$75 by using our automated
e-store at Yahoo
Your money back if
you are not totally satisfied.
How to Order
Affiliates
|
Introduction To
Risk Management for
Amateur Investors
by Vernon K. Jacobs
and N. Richard Fox
|
|
Risk Management for Amateur
Investors explains
how to protect your portfolio from
market cycles, business cycles, government interference,
unscrupulous brokers, incompetant advisors, income and estate
taxes and the litigation epidemic.
|
The amateur investor has taken a beating in the past two years.
* First, the dot.com bubble burst in the spring of
2000 and the market value of most technology stocks dropped like a
rock.
* Then, in September 2001, the stock market was
devastated by the attack on the World Trade Center and the Pentagon.
* Finally, in late 2001 and throughout 2002, the
national news was full of stories of executive fraud in many of the
largest U.S. corporations.
Some of the more depressing stories arising from the bankruptcy of
World Com and Enron were the stories of employees who had invested
all of their retirement savings in the stock of their employer. Now
they not only are without a job, but they have also lost their
savings.
Experienced professional investors were less likely to have such an
extreme risk exposure. They utilize a variety of risk control methods
such as trailing stop losses, put options and some complex hedging
techniques. The professional investor might have lost 10% or even 15%
from the highs of the various stocks they were holding, but most of
them would have sold after the market values passed a pre-determined
trigger point for selling. Although the market averages might have
plummeted by as much as 40% during the past two years, the best
investment managers cashed out with losses of 10% to 20% from the
market highs. The really good professionals (or the lucky ones) would
have cashed out before the markets peaked. Amateur investors who have
been invested with these managers have not suffered as much as those
who preferred to buy individual stocks because of the belief those
stocks were “hot” and would gain in value faster than the more stodgy
mutual funds.
This book is NOT intended for the professional investor or the
individual who has the time and temperament to monitor the markets on
an hourly or even a daily basis. This report does not discuss complex
hedging techniques or even basic portfolio risk management methods
such as stop loss orders, short selling or put options. Nor do we
discuss the even more complex tax aspects of such investment
techniques.
We hope this book will help some amateur investors to have a better
understanding of the many and varied kinds of risk that expose them
to potential investment losses and how they can develop an investment
portfolio that will protect their savings without requiring a huge
amount of their valuable time and attention. In addition, we believe
our approach to tax deferred investing will provide higher after tax
real rates of return to compensate for the lower risk profile that is
part of our risk management system for amateur investors.
This book describes a system that requires investors to make a
commitment about (1) whether to pursue “opportunities” by looking for
hot tips from brokers, friends, colleagues or even from investment
magazines – or (2) whether to focus on a system of risk management to
minimize losses from a wide range of risks.
The first step in using the approach described in this book is to focus
on building a framework within which to place various investments. That
framework will involve the allocation of your various assets into as
many as seven different categories. The framework will serve to combine
the various categories of investments that are owned by different legal
entities or persons. (e.g. assets in a trust, IRA accounts,
family corporation or limited partnership, etc. )
The second step is to make a decision about the degree of risk exposure
you wish to accept in exchange for higher returns. That decision will
determine how much of your total asset base is allocated to different
investment categories.
A third step is to decide how you wish to minimize taxes on different
kinds of assets by using tax favored investments or investment entities.
The fourth step is to decide how you want to minimize the risk of loss
from predatory litigation. There is a variety of structures that offer
different degrees of legal protection from lawsuits. These legal
entities also involve different kinds of tax exposure or tax
protection.
At this point you have merely identified how your existing assets are
currently diversified and how much tax avoidance is available to you. In
a sense, this is the starting point from which you proceed to modify
your asset base to obtain the degree of risk protection and tax
savings that you have elected to utilize.
The fifth step then is to begin a process of locating and evaluating
various investments to fill in the blank areas in your
diversification plan or to generate the kind of tax benefits you have
elected to pursue. At this point, you actively look for specific
types of investments with specific tax attributes. Then you need to
investigate and evaluate each potential investment to determine if it
meets your criteria for the potential yield, risk level, tax benefits
and tax risks.
The final step is simply to monitor and modify the framework and the
securities within it to adjust to changing times. Although we don’t
advocate a market timing approach to investing, there are times when
the market indexes are way above or below the long term averages.
When there is a raging bull market, the cautious investor will take
some profits out of the hot market and put those assets into a market
that is clearly below its normal averages.
|
Offshore Press -- Your objective
resource for global financial planning
|
||| Home || Order || Forum || Publications
|| Advisors || Library || Scams || FAQ's || Links || Samples || Privacy || Anti-Spam |||
Sponsored by Offshore Press, Inc
. Copyright, 2003, All rights reserved. Offshore Press, Inc., Box
8194, Prairie Village, KS 66208. (913) 362-9667. Email to Offshore
Press Vernon
K. Jacobs, Webauthor
.
|
|
