Final Point

You need to determine your risk tolerance and make sure your investments mirror that level. It is also critical to manage your money and financial matters carefully, as life expectancies are increasing. Many individuals will live into their 80s and 90s. Social Security, savings, and pensions may not be sufficient to cover their needs. That’s why people invest in the market—to grow their money for their retirement and to help pay for their children’s or grandkids’ education. If you want to be a successful investor, you need to use a systematic approach to managing and protecting your money. And, above all, you need to avoid bear markets that can damage your wealth and put you years behind in your plans to retire. Defense is critical in a bear market and that’s why you need an action plan that incorporates a method to take you out of the market to protect your principal. Now that you understand the importance of determining your risk tolerance and protecting against market declines using stop orders, the next step is to incorporate your risk parameters into a detailed investment plan. That topic is covered in the next chapter.