Silent Partner Consulting

enabling your cooperative self interest

Rules Of Finance intro
A Sovereign Speculator
Bastiat Free University - the businessman entrance
Rowan - and a message for Garcia
Eight steps to your financial freedom
Speculation Rules

 

Rules of Finance

Keys to financial success

(II)

 

Money Management

 

A most important concept is money management.

The keys to money management are:
* Keep losses small.
* Let profits run.
* Never commit too much to one venture.

 

Limit to 5 ventures. The skilled hunt is more important than the kill. Just starting out I would even have less than 5. Modern Portfolio Theory (MPT) holds to putting your eggs in a mathematically derived optimum number of baskets, perhaps ten or twelve. Wealth creation dictates putting them in just a few baskets, and watching those baskets very closely. Wealth is made through concentration, preserved through diversification. If you look at a thousand ventures, and pick ten speculations as the best, your top three should outperform the next seven by a bunch (bunch is a personally preferred, nonmathematicaly derived description). Two or three great ideas a year is a good thing. You are probably better off in cash than forcing yourself into an investment choice.

What goes up. Always take your profit too soon. Invest too early, get out too soon. When you are establishing a position, enter slowly. If you think you are early, pick up a small un-leveraged speculation. You will watch closer and read more when you own a bit; but be carefull not to think less. With increased confidence, expand the position. As others start to discover the new investment category. pick up size and perhaps a bit of leverage. Over years, the media will turn from hating the asset category, to giving reports every 30 minutes. It's time to get cautious again. The crowd will be right for a while in the middle of a run, but they will pick up speed as the cliffs near. When everyone thinks they are brilliant for making money off this financial bonanza, you should already have your positions started in the next, unrelated, ventures. Let the crowd rush past you as you prepare to travel to a new destination. Avoid cliff walking, don't try to capture the last 10%.

Plan ahead.

Success is dangerous. It is far too easy to believe in personal infallibility after a huge success. Everyone is a stock market genius and specialist when a market goes up for everyone. Don't become greedy and give it back. Get out, take a vacation, think and plan. Decide on your target before you shoot, once you hit it, move on.


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Keys to financial success (III)

 

 

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Silent Partner Consulting
3080 Needles Highway, suite 2700-44
Laughlin, Nevada 89029-1505

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