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AMERICAN INVESTORS TAKE TOO MANY RISKS
iDayo™ can reduce your investing risk by 90 to 95%. That’s a pretty strong statement, isn’t it? Let’s see if we can back it up.
First, let’s look at the risk the average American stock investor takes every time he or she purchases a stock. Over 52% of Americans own stocks. Of those who manage their own stock positions, over 75% have ten or less stocks in their accounts. For the purpose of this discussion, let’s assume they all have ten stocks.
For many people, their stock account represents all of their life savings, with the exception of the equity in their homes. So for these people, buying one stock means they are putting 10% of their liquid assets at risk. And the great majority of them never use stops to protect their stock positions. Ask any broker if this is not true.
A few years back two stocks were very popular: WorldCom and Enron. Many of the people who owned ten stocks owned both of these stocks, which lost their value in a very short period of time. For most of them, this represented a loss of twenty per cent of their life savings!
We never posted either of these stocks on our website, so iDayo™ Subscribers who strictly follow our system never owned either of them. But if we had posted both of them, the most our Subscribers would have lost would have been 1% of their account value (plus any possible “slippage”). This is possible because of iDayo’s Comprehensive Risk Management System, which limits losses to .5% in any stock purchased.
THE iDayo™ MIRACLE
How do we accomplish that miracle? When I started using iDayo™ many years ago I started the weekly educational conference calls for which iDayo™ has become famous. On these calls I introduced components of a new, more comprehensive risk management and capital preservation model I was developing for stock and options investors who used iDayo. So that all iDayo Subscribers could benefit from it, when I became the CEO of iDayo, Inc. I made the Comprehensive Risk Management System official policy for the New iDayo™ System which we created at that time. The old iDayo™ system had some risk management features built into it, but I realized that, along with the complete makeover of the iDayo™ product, we needed a more complete system of capital preservation.
I have spent my adult life in investments. I have been an investment professional, including managing a large stock brokerage firm in Palm Beach, serving as Vice-President of a national firm, and working as a financial planner and an Investment Banker. After I retired I continued managing investments for myself and others, but I spent much of my time teaching others how to invest wisely and safely.
I started teaching while I was still in the brokerage business, but after retirement I had more time to travel the world sharing what I had learned in over 35 years in this exciting field. I taught brokers, I taught in colleges, and I taught individual investors in seminars and workshops in many countries. My message always began with this concept: “Your first job as an investor is not to make profits. Your primary responsibility is to preserve your capital.”
You see, as investors, we are like farmers. If a farmer eats all his seed corn during the winter, he will have none to plant in the spring. And he won’t reap a crop. If investors take needless risks, they will lose their “seed” capital, and they will be unable to plant a crop. As the old saying goes, “It takes money to make money.”
PRINCIPAL PRESERVATION PRINCIPLES
As a financial planner, I always told my clients that the first principal of financial planning was diversification. Many studies have proven that larger portfolios reduce risk. One of the most definitive of these recommended that individual investors maintain a portfolio of forty stocks. The studies showed that as the number of stocks in a portfolio was reduced from that number, the risk increased not arithmetically, but geometrically.
A definitive article on this subject titled “How Many Stocks Do You Need to be Diversified?” was written by Daniel Burnside, Donald Chambers and John Znadowicz. Its opening paragraph reads:
“Among those who invest in individual stocks, one of the most commonly misunderstood concepts is that assured diversification can be accomplished with a relatively small portfolio of common stocks. Many people believe that diversification beyond 10 or 20 securities is superfluous despite clear research indicating that the opposite is in fact the case. Even some investment textbooks have helped spread the confusion.”
These studies encouraged me to change iDayo™ policy from the rather loose portfolio size of the old iDayo™ (which was often much smaller than forty stocks) to a portfolio allocation that called for 2.5% of a Subscriber’s account value to be invested in each stock in the New iDayo™ System. This has helped increase iDayo’s returns over the last several years.
Occasionally new Subscribers will object, “I can’t manage 40 stocks!” To this I answer, “You don’t have to. The System will manage them for you. It tells you what and when to buy, what stops to use, and when to sell. You only have to deal with buying and/or selling an average of four stocks in any week, about three times each month.”
The New iDayo™ System also places great emphasis on the use of stops. Stops had always been suggested in the old system, but there was never the kind of emphasis given to this concept that was required to gain Subscriber acceptance and compliance. As a result, some Subscribers lost far more on some stocks than they should have. Losses are an expected part of investing, but they should be minimized as much as possible. The New iDayo™ Comprehensive Risk Management System reduces risk in a way that no other investing system has ever managed.
By placing twenty per cent stops on positions of 2.5%, we reduce risk to one half of one per cent! That is 95% less risk than most Americans take every time they buy a stock. And it is 90% less risk than more conservative investors (who put 5% of their money in each stock) take.
WE ARE ON YOUR SIDE!
When I assumed the helm of iDayo™ I decided to encourage compliance with the New iDayo™ System’s emphasis on risk management by instituting free weekly Educational Conference Calls for the first time in the company’s history. These were recently changed to a Webinar format, making it even easier for Subscribers to learn how to get the most out of this fantastic system. Many Subscribers have told us that the Educational Webinars alone are worth the price of their subscription.
Let me wrap this up with one of my favorite sayings: “Risk is a four letter word!” It is impossible to invest with no risk at all. But our Comprehensive Risk Management System takes so much of the risk out of your investing that when one of your stocks drops the full 20% and gets stopped out, you only lose .5% of your portfolio value. If two stocks get stopped out, you lose just 1%.
Do you remember our example of WorldCom and Enron? If you had owned both of those stocks the way most Americans do, you would have lost 20% of your account value. If iDayo™ had posted them, you would have lost only 1%. I can afford to lose 1%, but I refuse to lose 20% because of poor risk management.
In addition to providing high quality, high probability stock postings, iDayo™ offers you a fully tested, automatic method of managing the risk of the stock market. When you couple high probability stocks with superior risk management, you have a winning combination!
Always remember this: With iDayo™ you are never alone. You become part of a community of investors – a family, if you will – who share the same goals and aspirations. And iDayo’s staff – from the CEO to the senior management to the office staff and customer service personnel – shares those same goals and aspirations. We will do everything we can to help you reach your investment goals while reducing your risk more effectively than any system on the planet!
Tom Barrett, CEO
iDayo, Inc.
www.iDayo.com
561-753-5998
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