(Wrap-up of ten-part series on Financial Truths)

In this episode, I tie together all the concepts I’ve introduced throughout this 10-part series on financial truths.  I illustrate a few different asset allocation ranges that will position you for profits and preserve your capital so you can trade for many years ahead.

Pick one of these asset allocation ranges that best suits your goals and risk tolerance, then just make sure your portfolio stays within the ranges at all times.

This process works for long-term investors in a 401(k) or IRA, as well as those with short-term trading accounts.


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Important disclaimers to review

Check out this page for my latest baseline asset allocations.

Download the free asset allocation workbook (Microsoft Excel format) by signing up for free email news and updates.  You will receive a link to download the file immediately upon confirming your email subscription.  You can unsubscribe at any time if you wish.



(CC image from Joe on Flickr)

Section 1: Financial Truths for Traders & Investors

  • Review of the series (find prior episodes here)
  • Why I chose the topics I did
  • How it’s different than what many others teach

Section 2: Take Action

  • A flexible asset allocation framework
  • Start today with the spreadsheet
  • Find the row that best suits you:
    • Choose one of the four categories based on how active you want to be
    • Move to the right side of the table.  Look at the annual loss section, with the 1-in-20-year, 1-in-10-year, and 1-in-5 year loss amounts: which row matches most closely with your personal risk tolerance?
    • Go to the right side of the worksheet and select that row from the drop-down box.  Those will be your asset allocation targets.

Section 3: Not Quite Right?  Here’s How to Adjust

  • Found the closest fit, but want to reduce the risk?  I explain how.
  • Found the closest fit, but want to take on more risk?  I explain how.

Section 4: The Next Level

Section 5: Make Sure You Stay on Track

  • Calculate and monitor your asset allocation
  • Calculate “asset exposure” for each investment or trading position you own
  • Add up the asset exposure by asset class (simple investment universe) or subclass (detailed investment universe)
  • Note: If you are using a highly leveraged strategy, use total assets in the denominator instead of asset exposure




Intro music by audionautix.com

Find more episodes of the Torpedo Trading Podcast at this link