Warren Buffet says that he doesn’t take risks. His moves are so thoroughly researched that he always buys at a deep discount, which protects him from a decline in the value of the company stock he has just bought.
Many investors who have gone back and done the math have concluded they would have done better if they had placed all their money in T-bills and just left it there.
The market is volatile enough that if you position yourself to fully benefit from the upside, the downside risk becomes so great that inevitably
the market will take back much, if not all, of the up and reduce your principal as well.
Warren Buffet says rule #1 is to not lose what you already have. Taking risk means you will have significant losses from time to time. The average Bear market lasts just 18 months but requires 5.2 years just to get even again. If you never experienced the loss, then you won’t be wasting 5 years just to break even again. A steady, positive return all the time will compete very favorably with at-risk positions that experience volatility on a regular basis.
Those that do well in the market spend extensive time researching opportunities before buying. They have an entry strategy, and just as important, they have an exit strategy. They also tend to do just the opposite of the masses and would seldom, if ever, find their buying opportunities listed on the cover or front page of any publication. If it’s in the paper, it’s in the price. In other words it’s already had its run up.
The key to successful investing is not managing risk; it’s avoiding it all together. When you become aware of any strategy that allows you to participate in the stock market without any market risk, fully protecting your principal and the newfound gains each year, you should seize the opportunity.
Today over $200 billion annually flow into these strategies, offering the account holders market opportunities without any of the risk inherent in the market.