The Tools of the Trade
To control risk, investment professionals use several tactics, which you can apply yourself to your own portfolio of investments.
Your portfolio is the mix of assets in which you have invested. A portfolio contains investment instruments that you’ve selected to achieve your financial goals, such as common stocks, bonds, Treasury bills, etc.
Before we discuss these tactics, let’s look at a basic tenet of investment theory: standard deviation. Don’t panic. No need to fear scary flashbacks of the math section of the SAT. It’s just a mathematical term that helps to frame the likelihood (or, in quantitative terms, probability) of a given number recurring.
Standard Deviation and a Podunk Potato
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