Homepage
PR Newswire
(05-08-2015, 02:47 PM)Musicwhiz Wrote: It is therefore important to always ensure one takes care of the worst case scenario through downside assessment and analysis - you cannot completely eliminate losses but it is possible to minimize their impact on your portfolio. And oh yes, dividends do help too - so make sure the companies you analyze and buy will be able to weather storms and still generate FCF and pay a dividend*.
I find it especially amusing when one's way to deal with the worst case scenario is 'if it continues to go south to XXX (price), i will average down. If it continues to fall another X% and i run out of bullets, then i will just hang on for the next X years. Anyways, based on the XXX dividends that i will receive, i will break even after Y years'....These are the new fools in the market.
The old fools know better after making so many mistakes (and survive and prosper for some). They abhor 'average down' because they understood the financial and emotional pain of catching that failing knife. They respect the Market because it has been 1 of his/her greatest humiliator based on the surprises it never fails to dish out every time. For example, our residential 'old fool' forummer GG has played this game long enough to hypothesize that the end of the O&G cycle will come if our 2 biggest rig builders merge in their final attempt to survive...This is what i would call a worst case scenario insight/planning.