How To Lower Your Risk In Stock Market

How to lower your risk in the stock market. We're going to dive deep into some money rules and what you're needing to get that risk down. Some of you have had a high threshold intolerance for park-and-pray financial planners. So I brought with you another alternative. Today we're going to introduce you to Kelly Korshuk, one of the smartest men I know, world-leading economist, and has created a software that will take care of any of the fears you have in the market. So the three things we're going to talk about today in lowering your risk in the stock market in these volatile times. We're in recession, high interest rates, higher inflation. So let's talk about the diversity of your portfolio, number one. Number two, how to do research in this volatile market. And number three, how to invest for the long term. And is that even a possibility given where we are? So I brought Kelly Korshuk with me. He was the architect and designer of my favorite software, which is iFlip. If you go to the description below, you'll be able to get a copy of a free app and check it out. We kick Robinhood's rear. For those of you in Robinhood, go get your money out of there, put it on iFlip. Not advice, just telling you. So Kelly, welcome. Hello, Laurel. So talk about the stock market kind of in general. And then again, about the points we talked about, how do you lower your risk through diversifying your portfolio? How do they do some research? I don't think, like you said before, I've talked to a lot of people who don't know how to do research. They don't know what to do and what they can do. Well, I'm going to address them one at a time the best I can and remind me which ones I missed. All right. First thing is, how do we reduce our risk in our equity portfolios? In general, iFlip, of course, if you are a user of iFlip, this is done automatically for you. However, if you're not and you do have money at your Charles Schwab account or TD Ameritrade account, the first thing you could do to reduce risk is to move monies into money market ETFs. Right now, money market ETFs are paying a yield of about 4% or higher, marginally higher, marginally lower, depending on which ETF you choose. So by putting your money into a money market ETF, what are you accomplishing? Well, one, that this money will never be lost. The way that money could ever be lost and the risk of those things is the underlying money managers of the ETF somehow have a fraud. And if you have a fraud on that, you are protected by the SIPC. So the likelihood of that happening is very, very low. Also, what is wrong with 4% or so with no risk? Now, if you do that and say you had a portfolio where you were fully invested of say $100,000 and you took a look and took all your losing stocks and you added them up and say you had $40,000 of losing stocks, you sold them, you have a tax loss on those stocks and you take that money that you got back and the money you got back, you put into a money market ETF. That money market ETF will not lose. If it doesn't lose, that means 40% of your money will always make that 4%. The other 60% of the money, say the market goes up, you'll make good money on that 60% and you'll still make 4% on the 40% that you had in ETFs. Market goes down, you're not going to lose nearly as much, for example, because you only have 60% of your money invested, but the other 40% will not lose and it will pay you the 4% dividend. In that way, you'll see that that cash, aka also known as money market ETF, is really the way you reduce your risk in your equity portfolio. That is the simplest, easiest way. And to do the research on it, all you would really do if you don't know which ones to use, just Google this. Google money market ETF and don't necessarily pick the highest paying one. Pick the one which has the greatest amount of assets. Those are generally run by companies, whether you like them or not, that look like State Street Securities or Fidelity or USAA, companies that are very large and they have lots of people in their money markets. Those are the safest ones and generally they yield very close to ones that might be marginally higher. It's not about trying to get the best rate. It's about getting a good rate and reducing your risk from a good money market ETF, generally from a company you probably have heard of somewhere along the line. So that is the first thing to do. Money market ETF is the best way to reduce risk and the research is quite straightforward. There are some recommendations I use if you want to use a Blackstone product, which some people don't, but it is a good company for sure. It's called the NEAR, N-E-A-R, NEAR means it's near short-term treasuries from the government. Probably not going to fail unless of course our government fails. That product will yield right now about 3.9% and maybe sometimes as high as 4% and it changes marginally, month to month. So those are two things we can do in terms of research and risk management. Was there another question in there, Laurel? Speak a little bit to the diversity. What else would you, any other thoughts on diversifying their portfolio and then speak to some long-term strategies? Near-term, again, anything I express sounds like an opinion, it's just my own. But in the near-term, again, I have probably in previous articles and writings of my own, I'm generally a fan of the companies that are offering strong dividends that we've heard of and know well. The energy sector obviously does this. I even noticed the other day that Verizon is paying 6.6% and it has gone down 20% in a very slow fashion over the last six months. So when you see large companies like Verizon or AT&T paying 6%, 7% and oil companies, some of them which are undervalued, paying 8% to 10%, what is wrong with having high quality companies, companies that we know will not go under paying me such a dividend? That is a good way to manage risk as well in the short run. In the long run, that's a different story. The long run is obviously, if it's a very long run, it's easy to predict that the market will be higher. But everybody's long run is not the same. One size does not fit all. A personal opinion is in the long run, say in my long run is five years, I feel five years from now, the market will probably be around where it is now. So which means that I really want to stick to things that I can feel will stay. If they're going to stay here now, I want to go for things that are dividends. On the other hand, if my long run is 10 years from now, I would be buying things that I think have good long-term prospects. Those things are generally the things that we all know as well. They're going to be the Apple, Microsoft, things that pay decent dividend in the case of Microsoft, or even a Tesla or Google. Some of these stocks, Google in particular, is priced much lower than it used to be during the heights of COVID. So now that long run looks more towards a very long run. I like technology better, not so much on healthcare and energy. In the short run, I like energy and believe it or not, some of the other infrastructure plays like AT&T or Verizon. Interesting. Those of you that are enjoying this channel, click that subscription button and put on that notification. We're here every day. We're here five days a week talking about money, finance, and business. If there's a topic that you want to know more about, put it in the comment section and we'll be right there. Again, those of you go grab a copy of the iFlip app. It's in the description below. So any other last thoughts for those that are in the stock market other than moving all their money, especially out of Robinhood? See, any other thoughts for people? Maybe speak a little bit to option traders. We have a lot of option traders that follow us and anything they need to be doing to watch. For option traders, the main thing all option traders look at is volatility. Right now, we're seeing volatility at very low rates, which means options pricings are very, very efficient. And if you see options that are on very heavy volume, if you're able to find volume in stocks where you might want to trade options, I think opportunities are good because the risk in a market like this is actually pretty easy to manage. The problem is that the short-term risk is easy to manage, but the long-term risk is much more difficult. If you're an options trader, for example, I would be looking at the things that are very steady in price. I'd be doing buying straddles, for example. Maybe I would sell certain straddles in things like the telecoms and things like that. Maybe the energies as well, things that I like, that I have a general idea of prediction. And in terms of the stock picking thing, again, my own opinions are, as I've stated so many times before almost everywhere, is that the stock market, I think over the remainder of this year, is not something to be deeply enthusiastic for, of. However, it doesn't mean you can't make money. It just means you need to position. And of course, our software, iFlip software, does all that for you, which is the real advantage. You don't really need to think of it. It handles these kinds of risks and this kind of opportunity, especially in an environment like this, extremely well. Absolutely. Kelly, thank you for being here today. Those of you that are enjoying this, have any questions or requests, go to asklaural.com, ask a question, make a request. We are there 24-7 helping you understand money and business in a way more complex way. So look forward to talking to you again, and we'll be back tomorrow. Thank you, everybody.