Insure Your Investment

You insure your house. You insure your life and the lives of your loved ones. Why not insure your investments 

With the current market shed most portfolios around, it would make sense to protect your portfolio. After all, the work we do significantly reduces the risk of losing money in an investment that we choose to get involved in. But we never eliminate all risks. Fully in the market

Buying a protective put will help to protect the market. Your new stock purchases This can be really helpful if you want to buy a particular stock but the overall bias in the market down. What is a pit? A put is a contract that gives the buyer the right to sell shares at a certain price for a certain period, until the expiration of the contract.

When you buy a share, three possible events can occur. 

o The stock can go.

o The stock can do nothing

o The stock can go down.

In two of the three scenarios above, you do not make money. In one of the scenarios (where the stock goes down), you have a great chance to lose money. Let's focus on what happens when you lose money.

At this point, I think it is wise to draw a comparison. If you drive a car, and your car is destroyed in an accident, you need insurance to get you back "whole" convert or close to it, again. A well works in the same way.

Imagine that when you buy a stock at $ 80, you also buy a put that expires in six months, and you pay $ 3 for that contract. Just like insuring your car for the next 6 months. If nothing happens to your car in the next 6 months will not you insurance premium returned to you,? You will not get it back ... and in fact, you will usually pay a different premium to cover six months of your car.

The purchase of the well means that you sell at $ 80 anytime before the contract expires. Stocks Even if the stock drops to $ 35, you have the right to sell at $ 80.

If the stock goes along as planned, and goes up, congratulations, you've made money. The premium you paid for the put was for insurance for six months. Like the example with your car insurance, that money will not be returned to you (it was the cost of coverage).

If the stock does nothing, even though you made any money you know your investment is covered in case of anything negative happening for the last six months.

If the stock goes down, you have coverage, and you also have choices. Remember what your self with a pit is the right to sell, in this example, at $ 80, the stock no matter what is the current price of the share (or it's $ 75, $ 45 or even $ 1).

o You can put in the open market for what is the current value.
o You can use the option and the "put" the stock to someone at $ 80, regardless of exercise. what the current price of the stock from

If you decide to exercise the put you have another set of choices. You can use the money in your pocket (remember that you effectively sold the shares for $ 80). Or you can buy at the lower market price, if you like the stock and the stock return guess it makes sense for you. If the stock has fallen a lot, you could conceivably buy more shares than you originally bought.

This strategy is not for everyone. And you should not rely on this article as a complete and personalized investment advice for your situation. But if you invest money you care about, whether it's in a house, a car or a stock, you should take steps to protect it. That's why we really need to talk.

With the market on defense, it makes sense to have. Some protection for some of your precious belongings If you want to see how you could get the files you visit Mullooly Asset Management, on , ourselves, or call us toll-free at 877-223-7300. Certain coverage

I hear too many people say they stay away from the stock market, because it is too risky and you can lose a lot of money. Without measuring or knowing the risks, or a game plan in place, you are almost sure to lose money. In my next article I will share with you a strategy limiting the amount of money you lose in a stock, a small amount can. This approach can keep you in the market for more than try your luck on buying a stock afloat.

Thomas P. Mullooly, President of Mullooly Asset Management, LLC  has more than twenty years spent in the investment world, as a broker and as an investment advisor. Mullooly Asset Management is a fee-only registered investment advisory firm based in New Jersey, specializing in retirement accounts, especially the management of 401k, 403b, and deferred compensation accounts for individuals. Feel free to contact us to check the relative strength of your portfolio by sending an email to or visiting  or sign up to get report and tips on how to invest your money on healthy