Top 3 Techniques to Get You Through the Tough Times

If there's anything investors crave in these unsettled times, it's stability. They're looking for a little peace of mind. But where do you find it? Many folks look in the wrong places and come up disappointed. You don't have to be one of those people.

With three reliable techniques you can control your risk in today's roller-coaster markets. With a stable base under you, you can reach for all the great growth opportunities that our dynamic global economy has to offer.

1. The first, and most crucial, risk-control technique is to maintain an adequate reserve of cash and near-cash instruments. During market panics, it's often said that "liquidity has dried up." What is liquidity? In simple terms, it's the ability to turn your investments into cash, quickly, without having to accept a fire-sale price.

If you're holding plenty of cash, liquidity is never an issue. You can always meet your day-to-day obligations without being forced to sell stocks or equity mutual funds at disadvantageous prices. Better yet, your cash (because it pays interest) grows even when market fluctuations may have knocked down the value of your other investments. Thus, cash tends to cushion the shock of market declines.

Get two more hot tips from Richard Band on how to keep risk out of your portfolio here.

by The Freshman |  07/03/08