There are things in our lives which tend to go wrong when we get more greedy, confident and impatient. I have witnessed this from the people around me, including myself. This led me into thinking that my stock market investments can go really wrong at times, and it will happen I know that, be it personal mistakes or caused by any crisis.
Hence, I think it's always good to watch your back even when your target is in front of you, because you might be back-stabbed. Watching your back means risk management while the target is your loved stock.
So how do I, and maybe you, minimize the negative impact when they really happen? [not if, just when]
1. Invest in companies I can really understand. Avoid cyclical and businesses with risky ventures. No elaboration needed on this.
2. Should expect a reasonable return. I am not capable of doubling my portfolio in matter of months. Reasonable return means reasonable risks. Losing 50% of my portfolio and I need 100% to return to my initial capital.
3. Avoid putting all my money in 1 single stock, preferably 5-10 quality equities. No matter how well you analyse, investing all you have in 1 stock is speculation.
4. [IMPORTANT] Keep my monthly commitment & liabilities low! When my portfolio goes south (it surely will sometimes), I wouldn't want to be haunted by credit card bills, car and housing loans. This is very important for those who invest a lot in shares.
5. [IMPORTANT] Do not use margin trading. If you are confident, just invest a larger portion of your money. There is really no need to borrow to invest. Don't get into trouble by greed.
6. Always have an emergency fund that I don't use to invest because that's for 6 months survival, especially when you have a family.
7. Always remain low profile even when you have made alot of money, because you wouldn't know when you will fall. Stay humble.
https://www.valueinvestingstock.com/single-post/2017/07/10/How-to-Be-Better-at-Bad-Times
