Investor Risk Management Strategies
Feb 09, 2018
The recent volatility in the stock market should NOT be a surprise if you have been following my warnings. If you didn't read the post please do so via this link. Perhaps if those geniuses on Wall Street where on my list, they would be more prepared and could advise their clients. An investor and/or any Financial Advisor "Must Be Able to See The Future Today". Otherwise, it's meaningless.
Therefore, I have consolidated my list of Risk Management Strategies which I have implemented over the last 12 to 24 months or so.
Here are the Top Risk Management Strategies every investor should implement as soon as possible;
- Increase the credit standards of your customer base, especially those who have long-term contracts (e.g. tenants);
- Evaluate your asset protection strategy with your attorney to ensure you have adequate protection from any lawsuits;
- Increase your operating expenses by 10% to account for higher labor and material due to rising inflation;
- Complete all cash out refinances as soon as possible and place long-term fixed rates debt on your properties;
- Do NOT overpay for any asset EVER, but especially this late in a cycle;
- When buying and/or building any new asset and forecasting the future value of that asset use realistic interest rates and expenses which must be higher than they are today with potentially flat or negative income growth;
- Make sure that you can support higher interest rates on any variable loans (e.g. credit card, mortgages, lines of credits, etc);
- Perform an evaluation of your total Portfolio as a percentage of your balance sheet. Here is an example.
- Real Estate - 25%
- Businesses - 25%
- Gold/Silver - 10%
- Life Insurance - 10%
- Paper Assets -
- Stocks - 20%
- Bonds - 5%
- Cash - 5%
- Complete and implement a Portfolio Defense Strategy including rebalancing for the above asset classes as follows:
- Liquidate positions which could be at risk and/or you are overly weighted;
- Buy other assets, which are undervalued or underweighted;
- Review your Umbrella Insurance Policy to make sure you have adequate coverage in the event you receive a lawsuit;
- Have access to the Five (5) "Gs"
- Minimize/Eliminate Counterparty Risk with Partners, Suppliers, Friends, Family Members, and Colleagues. If they don't know these Risk Management Practices nor can demonstrate proficiency in implementing be careful. Feel free to share this list in the event they are unprepared. Remember, their lack of planning will show their lack of experience and be a red flag and could be detrimental to you and your families lives if not averted;
- The debt of the US will grow by 100%. Trump must go from $20T to $40T in half the time it took Obama to go from $10T to $20T. The debt will be rapid by those on the left side of the quadrant via higher taxes.
- If you earn your income on the left side of the cash flow quadrant as an employee or self-employed person, thus receive a W2 and/or 1099, you will be responsible to repay the debt mentioned above via higher taxes. Therefore, it is imperative to begin transitioning to the right side of the quadrant as a Business Owner and/or Investor ASAP to reduce your taxes. To learn how to do this please enroll in our complimentary masterclass via this link.
- Begin building your cash positions to make sure you have lots of money to buy all the great assets which will be on clearance sale once all of the debt unravels and the recession begins. This is projected to occur around 2019 or 2020 so you have time, but don't wait to long to get started.
I will add new strategies to the list but I felt it was important to give you this list to begin preparing yourselves if you have not done these things already.
Feel free to post your suggested risk management strategy below this post as I welcome other suggestions.