Book Review: Upside Downside

Upside, Downside
Simple Rules of Risk Management for the Smart Investor
Written by Ron Dembo and Daniel Stoffman

Rule #1 - Know what you own: most investors don't. Ignorance is costly. Mutual funds are "products" that cost money to maintain unlike stocks or ETF: all can go up or down but mutual funds have fees.

Rule #2 - Forecasts are guaranteed to be wrong - use multiple scenarios and ensure your regret with the worst case scenario is acceptable to "you". Forecasts by famous experts fails "very" often.

Rule #3 : anticipate regret - look forward never backwards and use realistic benchmarks.

Rule #4 : Buy portfolio insurance - derivatives when appropriate to minimize catastrophic loss. Cap your downside then maximize your upside.

Book Highlight: Seeing Tomorrow

Seeing Tomorrow: Rewriting the Rules of Risk (Hardcover)
by Ron S. Dembo, Andrew Freeman

A good read for investment beginners or Pros. Looks at risk in an all encompassing way with consideration for probabilty of Reward, Loss, AND Regret.

The concept of regret is especially interested in validating why we make the decisions that we do.

The next time you consider a stock look at the whole choice of scenarios before jumping on board and always consider your regret in all scenarios.