Ombow, Looking at the risks we face as investors, the biggest of all is losing money due to our own bad judgement -
1) Bad judgement/decisions
2) Market volatility
3) Financial crises
4) Geopolitical events
5) Natural disasters
Category #1 includes just about everything done here on I-Hub - trading, chasing 10 baggers, micro/penny stocks, etc.
John Bogle's approach (founder of Vanguard) is to avoid individual stocks (use broad index funds/ETFs), and avoid market timing (use buy/hold).Risk (and emotions) are managed via the asset allocation (% in stocks vrs bonds). It's a slow but reliable way to build wealth, and not only minimizes risk but reduces taxes and transaction fees.
But it's boring, so if your main hobby is following stocks, I figure you can still do individual stocks with a small amount like 5%.
As Bogle said, if you're worried about the market/world, reduce your stock allocation and increase the % in bonds and gold/hard assets. Right now my target allocation is 45% stocks, 50% bonds, 5% gold, and my dad's (91 years old) is 30% stocks, 65% bonds, 5% gold.
No allocation is perfect, but if the stock market crashes 50% tomorrow, we would only be down 22.5% and 15% respectively, so not the end of the world, and the bonds/gold would probably be up during that period.
With a limited amount (5%) I can piddle around with individual stocks and not jeopardize the overall goal. The worst thing you can do is to gamble with large amounts in the market. Don't do it - been there done that..
