Reducing Risk, European Unrest and Walmart Turning $1 into $5K
Reducing Risk, European Unrest and Walmart Turning $1 into $5K
By:Ed McKinley
A weekly look inside Luckbox magazine
Five ways to reduce risk
Active investors should perform a daily ritual known as risk management. It’s especially important during these times of international strife, painfully stubborn inflation and increasingly unnatural natural disasters.
To help, Luckbox is presenting five strategies for anyone who’s feeling risk-averse: 1. Rebalance the portfolio, 2. Update stop-loss orders, 3. Re-evaluate take-profit orders, 4. Deploy covered calls or 5. Use protective options collars.
But that’s not the end of it. One might also choose to pare back individual holdings that have moved substantially in one direction or the other to reduce the risk of concentration. Another approach is to build a larger reserve of cash to use on a pullback. Meanwhile, hedging the portfolio—or a portion of it— locks in gains and protects against adverse movement.
Global credit spreads balloon in the run-up to French elections
As attention turns to the political fate of France’s President Emmanuel Macron, some active investors look to the VIX to gauge “fear” in the markets. But credit spreads can also provide insight into the level of risk.
Right now, enlarged credit spreads indicate the potential danger of a right-wing election victory in France that could cause shifts in fiscal management, immigration and trade.
By the way, we’re using the phrase “credit spread,” as it applies bonds. It’s a gauge of market risk that reflects the difference in yields between two sets of bonds, typically government vs. corporate. Don’t confuse it with the type of “credit spread” that’s an options trading strategy resulting in a net credit to the account, as opposed to a net debit.
Turning $1 into $5,000. It’s been done.
Offering products for every stage of a consumer’s life isn’t always exciting, yet Luckbox is studying five firms that have made a lot of money for shareholders by manufacturing and distributing some fairly mundane wares.
Two of them, Coca Cola (KO) and PepsiCo (PEP), have accomplished that by peddling sugar water to the world. Two others, Colgate-Palmolive (CL) and Proctor & Gamble (PG), became household names by cranking out cleaning and hygiene products. The fifth, Walmart (WMT), sells groceries and nearly anything else you can think of to the mass market.
Their growth is measured in tens of thousands of percentage points or, in the case of Walmart, over half a million percent—a figure so large you can hardly wrap your mind around it. A single dollar bill invested in Sam Walton’s brainchild in 1977 would have grown to about $5,000 by now.
Ed McKinley is editor-in-chief of Luckbox magazine.
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