It’s a New Year filled with both promise and uncertainty! If we have learned anything in the past two years, it’s that in uncertain times, it is critical to mitigate risk. To do that requires a solid strategy. Thoughtfully and consistently employing that strategy actually frees us. Risk cannot be eliminated but it can be managed and mitigated.
As we look at 2022, we consider what can be done to participate in the opportunities while managing the risk associated with uncertainty. Here are four tactics every investor can use.
1. Only invest in stocks that are trending.
In any market, there will be stocks that are trending!
Trend Following, as an investing strategy, has been in existence for several hundred years. You may have noticed the quote on our Home page by legendary economist, David Ricardo, “Cut short your losses, let your profits run on.” He made that statement in 1838!
Trend Following is a Technical Investing Strategy based on studying a stock to determine if its price is “trending”, that is, increasing in a particular direction. Stocks can either go up, go down, or stay flat. It is not trying to predict a trend, but rather is analyzing it to see if a trend already exists.
On the Trending Stocks platform, we only consider stocks whose price is trending up. In order to analyze a stock, we use an assortment of indicators including but not limited to: moving averages, relative strength indices, and various, complex algorithms, so you don’t have to.
2. Always use a Trailing Stop Order!
Why? So you can sleep at night, especially during trying times! Use a Trailing Stop Order to protect the downside risk and to lock in profits on the upside.
The Trend Following Strategy is highly focused on cutting losses and employs indicators to try to determine when to exit/sell. We believe the Trailing Stop Loss Order is an essential Risk Management component of the Strategy. Some trends can be quite long, others may be very short. With this feature you do not have to watch your stocks every day even in uncertain times. And you will sleep a lot better!
3. Take smaller positions to allow for more diversification.
Buy smaller numbers of shares in more companies over several Sectors. Look at the stocks you already own. If they are trending hold them. If they are not, consider selling them to buy shares in companies that are trending. Don’t overweight in any one Sector. It is certainly tempting to load up on stocks in the “hot” Sector, but remember we are talking about managing risk here and we have already determined that times are uncertain. You want to improve your opportunity for profits while managing the risk, not ignoring it! Diversify.
4. Consciously, with intention and attention, choose to have a Happy New Year, every day!
While this might not appear to have relevance to investing, we beg to differ.
By choosing to be happy, despite what is happening in the world, you ARE investing in yourself! In your mental, physical, and emotional health and that of your family and your community! We are part of this amazing web and by choosing happiness you bring health to the entire network.
Given the past two years, it would be easy to say, “I’ll only be happy when things get better.” Depending on how you define that, if it takes another year for ‘things to get better’, 365 days will have been lost. Not only to you but to those around you. And they can never be recovered.
“A person is about as happy as they make up their mind to be.”
Let’s build that mental investment portfolio and consciously look for things that make us smile, every day, and celebrate them. What makes you smile?
The Happiest of New Years from Trending Stocks!