Continuing from part 4 of the chapter, new terms of wealth accumulators and wealth preservators came into focus. There are investors who have built an amazing nest egg, these are the ones who focus more on a trend-following strategy as a way to outlive the stock market.
The concept can be explained as the growth of wealth means making more assets or wealth, whereas wealth preservation means to safeguard that wealth. Growth of wealth occurs as a result of getting returns from investments while preserving it means effectively securing it in the form of bonds or similar options.
Wealth preservation is a policy that makes sure the assets grow while providing a legacy for future generations. For wealth preservation there are various investment avenues all aiming at securing wealth for the long term.
It allows the release of the remaining part of the portfolio to avoid selling out at an inauspicious time. It provides contour for rebalancing the bouquet of investments.
Such a strategy can be followed only with a set of sensible expectations in advance. It cannot be denied that there would be a span where this strategy will not work. One has to pay the insurance premium occasionally in the form of whipsaw trades. Let’s not forget the truth of the universe that no strategy fully has the ability to perfectly nail the timing of the market.
The reason we say this is because no one can predict when these huge turmoil will happen. We can’t rely on intuition or gut feeling when trying to find out when and at what point of time, the figures will get nervous.
Price and trend will tell us the happening and non-Happening of any event and we will devotedly follow them. This fact convinces me to hold during a stormy bull market. The importance of behavioral management to improve performing investments by averting goofs.
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