Portfolio Management

Strangely enough, and I’m sure you are no different, I've not been updating my stop orders.  Some of my investments have moved away from my initial levels, and I have exposed myself to serious risk – and the potential to see my hard earned profits disappear.

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The famous wall street saying goes “In the market, bears make money,
bulls make money, but pigs get slaughtered.”  I tell you, I’ve been a little piggy lately.

I think it’s time to do a little portfolio review.  Maybe take some
profits – maybe not.  At the very least we need to adjust our stop loss
orders.  Now the million dollar question is where do you place your stop
loss?

I have seen every suggestion for stop loss placement, from the simple,
to the complex.  Investor’s Business Daily has a rule that everyone
exit a trade if it moves against you by 7% or 8%.  I know an investor who
uses an ATR (average true range) calculation which roughly tracks
volatility and plans exits at the bottom of the range.  Yet another investor
I know limits his loss to 5% of his portfolio value, but he is very wealthy and keeps a small number of investments in his portfolio.

Truly these methods are a dime a dozen.  The important thing is that
you pick one and stick to it.  Even if it is only mental!

•   Commodities – Specifically metals (13% + in one month)

Industrial metals companies continued to rally being up more than 15%
over the last month.  This is being driven by continued rising demand in
the metals including Copper (+14%), Aluminum (+14%), and Silver
(+13%), all of which as an industry are showing continued strength.  This
market continues to be driven by high demand from developing nations –
like China – which drive high commodity prices, when coupled with low
production costs traditionally built into the industry are a recipe for
profits.

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