Markets Rise; Markets Fall
When
it comes to stock investing, one of the most accurate predictions remains:
"Markets have their ups and downs." Sometimes the bulls win and
sometimes the bears win.
One of the sad truths is that too many individual investors unload
their holdings after a significant decline, missing out when the decline ends a
a large rally ensues. Although good advice (If you are an individual
investor, do not try to time the market when investing for the long
term) is easy to come by, it is understandable that people become
frightened during market downturns.
When they lose enough, they sell everything, trying not to lose
their remaining assets.
Options to the Rescue
If
you have ever succumbed to that vicious trap, or if you are thinking about
dumping investments to provide more security for your remaining assets, please
reconsider.
Options -- the conservative and versatile
investment tool --
can help you avoid making decisions that result in a financial catastrophe.
If you are a long-term investor (short-term traders have a different
mindset and a different trading style) who occasionally thinks in terms of owning
safer investments that come with built-in insurance against a huge loss, then
options can be your salvation. But please understand: Options must be used
wisely to achieve the peace of mind that comes with safety.
Option Strategies for the
Bullish (but Frightened) Long-Term Investor
· Very aggressive technique that allows you to remain fully invested, but which protects the entire portfolio. NOTE: "Protects the
entire portfolio" does not mean that you will never lose money. Instead it
means: If you pay a premium -- just as with an insurance policy -- then all
losses become limited to a predetermined (and hopefully acceptable to you) sum.
In other words, a stock market tumble will result in a monetary loss, but your
portfolio will survive.