Corporations hire special people to watch the risky endeavors of various departments. Almost all have internal audit managers that check on company activities in the hope of nabbing anyone who may be exposing company assets to undue risks, or unethical or illegal activities. These are usually well-paid and capable people who are charged with watching over the prestige of the business and protecting its money.
All of us who raised children in the last few decades had some form of risk control or those kids might have never reached adulthood. There were always things that were off limits for them because the risks were just too high. To some of these youngsters, our restricted list was unduly oppressive. There were always plenty of bright, cool kids jumping off the freeway bridge to the river below. How could I possibly have put that on my restricted list?
Good risk control plans can see us through tough times like the bear market of 2000, '01 and '02. And good plans can help us keep perspective in declines such as the one we face right now. Any strategy can be strained during tough times. Even our major banks, which are charged with not losing our money and have risk control personnel around the globe, have blown about 200 billion dollars in recent months. Without such safeguards, however, many of those banks would not be in business today.
Any risk control for individuals must be tailored to the individual or family but all should have common components. Here are some of those to consider:
Keep a great portion of one's investments in liquid form.
Never invest too much in one item. Have a maximum in mind before you consider buying anything.
Always have multiple investments. If one cannot afford to diversify, one should not invest.
Cash is King. Maintain enough money to ride out a multi-year financial storm.
Never be forced to beg someone to buy your assets.
Do not sell just because markets are falling.
Do not buy in down markets unless you are prepared to wait out the down cycle.
Seek quality. Successful investing is payoff from well-managed entities at work over time.
A lot of money has gone missing from our balance sheets over the last few months. Some is gone for good but much of it will be back in the recovery and new money will be made in the future. Prudent investing and a good risk control plan will help to maximize those returns.
L. Dean McGowan, Sr. Vice President Investment, UBS Financial Services 5080 Spectrum Dr. Ste 1000W, Addison Tx 75001, 972-450-4322, toll-free U.S. 1-800-288-1515, From Mexico 001-800-010-1323. McGowan will be in Guadalajara on February 14 and 15 at the Holiday Inn Select. He will be in Ajijic on February 16 through 24 at the Hotel La Nueva Posada, 766-1444. To schedule an appointment, call his office. There will be an investment workshop on Monday, February 18 at 10-11:30 a.m. The public is invited.
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