Suppose we were to ask you, "What is the first thing you need to do in order to attain financial security and build wealth?" What would your response be? If you're like most people, you'd probably say, "Earn more money and invest wisely."
And you'd be wrong.
The first step in getting control of your financial life is ensuring that what you already have, regardless of how much or how little that may be, is protected. Many people are so focused on getting more that they forget to take the necessary steps to preserve their current assets until it's too late.
Protecting your money is even more important than making more of it, because once you get behind, it's very difficult to catch up. Let's look at a simplified example.
Suppose you buy 100 shares of Widgets, Inc. stock at $1 a share. During the first six months of your investment, Widgets'top competitor introduces a hot new product and the value of Widgets'stock drops by 50 percent. But there's good news on the horizon. A few months down the road, Widgets comes out with an even hotter product and the stock doubles in value. Great, right? Not so fast. After the first hit, your stock was worth only $50, so your 100 percent profit only gets you back to your original $100. You're barely breaking even. That's why it's important to avoid loss if at all possible, because once you're in a hole, it'svery difficult to climb back out.
Unfortunately, a no-risk investment simply doesn't exist, but there are ways to determine the level ...