Tips For Successful Money Management
by admin on 14/10/08 at 1:51 am
In the realm of finance and investment, the term “money management” is often thrown around, and at times can be particularly overused. The idea behind this topic is that by managing your money in a logical and conservative way, you are able to preserve your investment capital to the extent that any losses your investments may generate, end up have null affect on your overall portfolio in the long run.
So what are a few tips on the topic of money management? Well first off, adjust your strategy to the level of capital you have to invest. I’ll take a specific example here and run with it. Most investment professionals recommend that you risk a set percentage of your overall account value for each trade that you do. Let’s say you choose 5% per trade. If your account is valued at $100,000 , then the maximum loss you should be willing to take on a single trade is $5,000. This is excellent and works well. But what if you only have $1000? 5% of that would be just $50! Obviously, that leaves you with little room for movement. The moral of the story - always adjust your money management strategy to fit your account balance.
