Risk Management Strategies

Protecting your capital is just as important as finding winning investments. A few simple practices can help limit downside when markets turn volatile.

• Diversify. Spread your money across different sectors and asset classes so one bad pick does not ruin your portfolio.

• Use stop-losses. Define a price where you will exit a trade if it moves against you.

• Revisit allocations. Review your portfolio every few months and rebalance if one holding grows too large.

• Keep cash on hand. Maintaining a small cash position lets you take advantage of opportunities without selling in a hurry.

• Avoid overconfidence. Stick to position sizes that won't put your portfolio in danger if a trade goes wrong.

Following these steps can keep small losses from becoming big ones over time. Discipline is essential, so write down your rules and follow them consistently.