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Strategies & Market Trends : Portfolio Protection + Money Management for the Long Term
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To: John Stichnoth who wrote (48)4/20/2000 5:20:00 PM
From: BDR   of 57
 
Thank you for your wonderful contribution. Definitely a worthwhile read and I appreciate the points you made. My reasons for starting this thread have to do with a change in approach on my part to investing. In the past, and even now, we have lived off of my earnings. My portfolio performance was something of an abstraction as ups and downs had little material effect on our lives. However, recently I have begun to feel that our investments may have to be our main source of support in the not too distant future. Hence my shift in focus from just maximizing gains (perhaps the competitive factor you referred to) to preservation of capital.

With regard to options, I agree that they are a high cost form of risk management. I am yet to find an option market with sufficient liquidity to produce narrow spreads. Add to that the relatively high commissions and options are not that attractive. The cost kept me from taking that approach to protection a few weeks ago, though in retrospect recent drops have been some of the few times that the magnitude of the drops would have justified the expense. Since these events cannot be predicted with any degree of certainty, I will stay away from puts as a form of portfolio insurance. The other aspects of portfolio management that you mention to minimize risk seem more appropriate.
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