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Brett earned his first contrarian investing profits in 2004 when he purchased an obscure investment (at the time): sugar futures. His friends on Wall Street stopped laughing soon enough when sugar rocketed to multi decade highs, illustrating that it indeed pays to be contrary. Brett quickly... More
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  • Riskalyze 2.0: Finding New Investments To Fit My (Apocalyptic) Financial Outlook 0 comments
    Feb 19, 2012 6:54 PM | about stocks: INTC, WMT, URA
    Last week I had a great lunch (yeah fried chicken at Magpie Cafe!) with my pal Aaron Klein, CEO and Co-Founder of Riskalyze. Aaron and his team are working to bring sanity, perspective, and guidance to the average investor with Riskalyze - a tool aimed at helping you get a grip on your risk tolerance and financial outlook, and find appropriate investments that are harmonious with both.

    Riskalyze's thesis - which I think is a fair one - is that very few investors have an accurate grasp on their personal tolerance for risk. Hence they buy and sell like gunslingers, without any plan, and inevitably sell at the bottom, and buy at the top. Which is part of the reason that most investors - and hell, even most mutual fund managers - underperform market indices!

    In October, we covered Riskalyze's 1.0 release - click here to read this "instant classic" - which we broke before Marketplace's coverage of Riskalyze!

    Now that the team has incorporated initial user feedback into their second release, we're going to take another look at the tool. We'll see if we can overwhelm it this time!

    Step 1 - Enter the stocks or funds that you like

    A stumper out of the gate!

    • INTC - I think reports of Intel's demise are greatly exaggerated...and we'll get paid a phat 3% dividend while things play out
    • SLW - The silver rights purveyor, which I like to refer to as "a call option on a call option" in terms of fiat going down
    • GLD - Nuff said
    • URA - Uranium has to go up again at some point, right? (Great start to '12 for URA thus far)
    • WMT - Wall Street is starting to pay more attention to Wal Mart's heavy and increasing dividend
    Step 2 - Capture your risk fingerprint

    We've got three options:

    • I slowly nurture and grow my money
    • I take risks, but wear a seatbelt
    • I shoot for the stars
    I selected the third option - which was true, back in the day, when I had money to invest (that was before I decided a job sucked and a time tracking software startup was a better option...but I digress).

    Next I received a few questions to gauge my tolerance - and really my mental calculation when determining risk/reward. For example, would I prefer a guaranteed gain of $417, or a 50% chance of losing $10,000 coupled with a 50% chance of winning $15,000? ($10,000 was my the initial "stake" benchmark I used, by the way).

    With an expected return of $2,500, you probably don't have a doubt I rolled the dice on this one.

    Step 3 - My economic prediction

    As tempting as it was to select an apocalyptic option, I had to temper myself. This IS an election year after all (actually there are 40 elections worldwide this year, according to Jim Rogers). And as Jim puts it, money printing is not only a likelihood, it's probably a guarantee. 2013 is the year to worry about.

    As goes Jim, so goes our macro prediction - I selected the sideways market option.

    The Result - My investing roadmap, according to Riskalyze

    Investment Portfolio I slowly nurture my money I take risks, but wear a seatbelt I shoot for the starsResults (Jan 14 - Jan 27)
    SPY ? Stocks (S&P 500) 46% 52% 50% +1.9% 
    AGG ? Bonds (iShares Bond Fund) 30% 17% 2% -0.0% 
    IYR ? Real Estate (Dow Index Fund) 16% 25% 38% +4.8% 
    GLD ? Precious Metals (Gold Trust ETF) 7% 7% 9% +5.3% 
    Risk-Free Savings / CDs 1% 0% 0% +0.03% 
    RESULTS (Jan 14 - Jan 27) +2.0% +2.5% +3.3% 

    Another cool comparison, courtesy of Aaron, is what my profile would look like with varying risk tolerances and economic predictions:


    To get your investment roadmap, you can try Riskalyze, for free, here.

    Disclosure: I am long INTC.

    Themes: investing tools Stocks: INTC, WMT, URA
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