I created the 3 risk pockets as a short-cut to everything the FIT course encompasses.
First, we’ll start with the Market Risk Pocket. It is here that Wall Street has led you to believe that all will be solved; that your needs will be met by the almighty market. Wall Street wants you to be of the all-in, all-the time mindset.
To them, that means, all of your money, in the market, all of the time.
Now, a set it and forget allocation will perform well in certain scenarios and perform poorly in others. It is a very one-dimensional approach.
Yet, life is not just one-dimensional. The market is not one-dimensional.
So to counter this Wall Street has you relying on diversification to manage your risk. The problem I see with that is Correlation Kills Diversification. And Correlation is most present in the darkest hours of the market. In other words, When markets get to the edge of the cliff, most assets classes hold hands and jump off together causing great pain. That’s a real kick in the pants.
It is imperative that you understand how the expectation of diversification as a risk management will likely fail you when you need it most. This is one of the Key areas we address in the Financial Intelligence Training course.
In my next video, I describe how all the other folks relying on a traditional approach ignore the fact that you need income every month regardless of the market’s performance. Join me.