| Here are three steps to ensure that you never lose a night's sleep over your investments. 1. Decide beforehand how much you're willing to invest. I always recommend that people keep whatever funds they need for the next three years in cash or something very safe, like a Treasury, certificate of deposit, or highly rated bond. That way, you know that no matter what happens to the market in the short term, you'll still be able to afford your mortgage, pay for an upcoming wedding, or cover whatever other expenses you may have in the next three years. 2. Position size. After that, determine the most you're willing to lose on each investment and take the necessary steps to ensure your losses won't exceed your limit. If you're speculating with options, assume you will lose 100% of your investment. That's usually not going to happen, but if you assume the worst, then you'll position size accordingly. If you're willing to risk $1,000 on a particular options trade, you would keep your purchase to $1,000 or less. That way, if the option goes to zero, you can't lose more than $1,000. The Oxford Club recommends that no more than 4% of your portfolio be invested in any one stock. 3. Set stops. We also typically recommend a 25% trailing stop, because if you invest 4% and the stop is hit, you've only lost 1% of your portfolio. Most investors can come back from that small of a loss. So if you're willing to risk $1,000 on a stock, you could invest $4,000 as long as you have the 25% stop in place. Because it's a trailing stop, if the stock moves higher, the stop does as well, so you may not lose the full 25% if your stop is triggered. There are also many times when your stop will get you out with a profit, protecting your gains from becoming losses. Sleep Tight Many people fret and lose sleep when the market slides. But if you know that your potential losses are limited to what you've already decided you're willing to risk, it is a lot easier to handle, and you'll make fewer emotional mistakes that would've otherwise increased your losses. Sweet dreams. Marc | 
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