Millen's Blog

Join the Mindful Money Call

Receive FREE Support and Guidance each month!

For Financial Success


The old saying “it takes money to make money” is true when it comes to growing your wealth. While Investment can be a very profitable strategy for Wealth Growth, it comes with a lot of intrinsic risks.


Most likely you know at least a handful of people who lost money in real estate or the stock market. I was one of these people. I invested in real estate without doing my due diligence and lost… I invested 100% of my 401K funds in the stock of the company I was working for at the time (Morgan Stanley) and was doing great until the market crashed in 2008-2009.


I was shocked and really frustrated by my lack of discipline! Since that time I implemented many risk strategies and became very successful with my investment endeavors. I’ve learned my lessons the hard way but you don’t have to. That is why I want to share with you some of the most important Risk Management strategies I know and use.


Investment Risk Management strategies

The most important question to ask when considering any investment opportunity is, “How much money can I lose?” Being a successful investor requires patience and caution. Since I am not naturally wired with these faculties, I have to make a conscious effort to pause and ask myself these risk management questions:

  1. How much can I lose if things do not work out as I hope?
  2. How can I minimize the amount of loss?


Asking these questions gives me time to contemplate risk management tactics and helps get my emotions out of the way. Once I take care of the potential risk, then I can focus on the fun part—making money!


Most people who are new to investing are focused on the potential upside, chasing the latest hot opportunity. They are not inclined to think about what would happen if the best-case scenario doesn’t happen (and it rarely does). Every person has a different risk tolerance, but investors who employ prudent risk management strategies usually enjoy steady wealth growth and experience much less worry and stress.


Longer Term Investment Timeline Decreases Risk

Trading does not equate to investing. There are a lot of day-traders—people who trade in-and-out within few days by taking advantage of short-term market fluctuations. Very few short-term or day traders have acquired great wealth.


Investing, on the other hand, has a much longer time horizon and most asset classes—stocks, real estate, commodities—appreciate over a longer period of time. This is one more reason to research your investment choices very thoroughly and apply simple risk management approaches.


Furthermore, there are times when sitting tight/doing nothing is the best solution—don’t feel pressured to always buy or sell. It’s not the frequency of investing but rather the quality of your decisions over time that adds up to great wealth. Learn when to act and when to wait.


Asset Allocation and Diversification As Risk Management

Prudent investing is about reducing risk first. Next it is about managing profits. Nobody can be right all the time, and a disciplined attitude coupled with fundamental risk management are essential. Taking on more risk often leaves you feeling broke instead of wealthy.


Asset allocation is an investment strategy that helps balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to your risk tolerance, goals and investment timeline.


Asset allocation is based on the principle that different assets, not perfectly correlated, perform differently in different economic and market conditions. For example, a conservative portfolio may contain the following asset allocation: 40 percent corporate bonds, 10 percent treasury notes, 20 percent cash, 20 percent precious metals, 10 percent stocks. In contrast, aggressive portfolio may have 100 percent of its funds invested in stocks….


Diversifying your savings among different asset classes (cash, bonds, precious metals, etc.) decreases your risk of massive losses. Diversification as a risk management tool is extremely important for choosing the actual investment vehicles.


NEVER…EVER put all or even most of your money in any one particular investment.


If your employer offers you shares of common stock of the company as a form of retirement contribution in addition to your own retirement contributions (a good idea since your contribution is tax free), find out how you can diversify all retirement money among different investment vehicles.


Position Sizing Helps Prevent Big Losses

Keeping the discipline of putting no more than 5 percent of your portfolio in one particular position helps avoid significant losses in your asset portfolio. This applies to any asset class.


Imagine putting all of your retirement savings into stock issued by the company where you work…and then watching the stock decline due to conditions beyond the company’s control. This imaginary scenario became a reality for a lot of employees during past stock market meltdowns and individual companies’ stocks crashes.


Another investment mistake that pertains to position sizing is price leveraging. Let’s say you purchased 500 shares of a company “Z” at $50/share. Then the stock price falls to $30/share and you decide to buy another 500. Your average cost per share of stock now is $40 and you own 1,000 shares.


In one week the stock “Z” falls further, to $10/share. You decide to take advantage of yet another bargain and buy 1,000 shares more, so your average cost per share becomes $25. It is highly possible that the stock price will continue sliding and you may end up with a disproportionately high amount of bad investment….


I emphasize the importance of having discipline about position sizing and diversification so that you will never end up with disproportionately high amount of bad investments. Greed and emotions are worth enemies when it comes to investment.

I will continue sharing with you about other risk management strategies next week.


To Your Health, Wealth and Freedom!

With Love and Gratitude,

millen sig



Millen Livis

To learn more about Millen and her mission of Financial Freedom, click here

About Millen Livis

Thank You For Sharing ...

8 responses to “Investment Risk Management Strategies – Part 1”

  1. It sounds like you’ve experienced what can happen without some foresight and understanding of how to invest, Millen. I think I’ve mentioned that I did lose a lot of money on a property I purchased in Arizona in 2006. Although I had a tenant who almost covered my expenses, when the housing market collapsed in 2008, I couldn’t afford to refinance the mortgage and IndyMac wasn’t willing to “negotiate” because I was a foreign national and it wasn’t my primary home. I’ve lost in many other “too good to be true” investments as well. Now I have an advisor who is brilliant and uses all of the guidelines you suggest above. So far my investments are earning above what one would anticipated and my principal is quite protected. Whenever I am approached now about a fabulous new investment, I politely decline and defer to my advisor. Great tips based on real life experiences. Thanks for your passion for helping us all!

    • Millen Millen says:

      Thank you for sharing your great investment lessons, Beverley. Yes, some lessons are quite expensive but as long as you learn from them – it’s worth it! I can see that you are much more aware of the risks involved in “too-good-to-be true” investments and seems to have a really trusted advisor for your investments. I am sure the wisdom evoked by your investments lessons helped you to find the advisor who you can trust as it is very rare. Thank you for contributing to the conversation!

  2. Sorry you had to learn such a hard lesson Millen, but then I’m a firm believer that sometimes these hard lessons turn out to be turning points in our lives that take us down a better path than the one we were on, and it sounds like that’s what happened with you. Thanks for sharing your knowledge with us. I really like the way you explain investing in a way that anyone can easily understand.

    • Millen Millen says:

      Thank you for your kind words, Marquita. Yes, I agree with your statement: sometimes we need to experience a “contrast” to learn what works. I learned my painful lessons and became quite successful at my investments going forward. After all, what matters is not how many times we fall but whether we can get back up, learn and move on to even better success. Thank you again for your ever insightful comments!

  3. I was never in a position to invest but did let my tax preparer talk me into a 401K. My employer did not match so it was forced savings. Very good advice for me. I knew I would retire with a pension equal to my annual salary, so I didnt worry. My hubby (#2) loves to follow the market & when we dated led me to think he had a lot invested, only to find that his investments matched my 401K. Combined pensions afford us a comfortable life style & he still watches the market as if we had significant investments.

    • Millen Millen says:

      Thank you for sharing, Roslyn! I am really glad to hear that your pension and 401K allow you to have a comfortable retirement. Not many people can retire comfortably these days. Stock investment is not for everybody…. Most people prefer to outsource it to financial advisers. I happened to like investing and, while made a few mistakes, have learned a few things about risk management. And I am passionate about sharing my financial experience with other people. Thank you for contributing to the conversation.

  4. Joyce Hansen says:

    I think a lot of people don’t ask the serious questions when it comes to investing, especially their level of risk tolerance. This is a very helpful article because you point out the importance of diversification, not having all your eggs in one basket and having an independent financial advisor (the most important of all).

    • Millen Millen says:

      Yes, Joyce, I agree! So many people got burned with their investments (whether it’s the stock market or real estate) because they were not considering potential risks. And we all have different risks tolerance, which is one of the main factors in making investing decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *

  • ::Millen has a way of opening up conversations that not only make you feel safe to talk about money, but her questions have been so profound that they have made immediate shifts in my mindset and my circumstances have changed almost immediately too, including more money showing up, but more importantly, more and more opportunities.  I have found new and inspired direction, and am feeling a lot more peaceful and excited about life in general. Millen offers so much value and a solid advice! She is a big picture thinker and it is infectious! Thank you, Millen, from the bottom of my heart and the top of my soul.

    ~ Renee Commins, Coach, Renee Commins Coaching

  • ::Millen Livis is a gift to humanity. Millen is very generous with her time and energy, sharing her vast life experiences and strengths, empowering me to become a better human being. Millen has impacted my life spiritually, emotionally, physically and financially, by her encouragement and clarity. I have not said, “Thank you!” enough.

    ~ Heidi Stefan, B.A. Detox Support Counselor, Archstone Recovery Center of the Palm Beaches, Inc.

  • ::Millen brings together an interesting mix of feminine wisdom, clear logic, assertiveness and humility in all of her interactions. With her warmth, intelligence, diverse experience and passion for ‘Dare to be the best you could be’ message, she inspires other women to reach for the goals they set for themselves.

    ~ Sharon Keller, Golden Bear Realty, LLC

  • ::Using laser like energy, Millen gives her full attention to your issue and stays with it until a satisfactory resolution or conclusion is reached. Open minded, yet direct and honest, Millen balances objectivity with compassion. It is a joy to work with her!

    ~ Mary L. Holden, Freelance Editor and Writer

Become Financially Powerful Strategy Session


During this FREE consultation ($497 value) you will:

  • Get absolute CLARITY about the dream lifestyle you REALLY want to have
  • Discover four essential building blocks for achieving financial freedom in your life
  • Determine the #1 thing stopping you from having the financial success you want
  • Identify the most powerful actions you can take to move forward with confidence
  • Complete the consultation with the excitement of knowing EXACTLY what to do next to create the lifestyle and financial success you desire

I would LOVE to help you create your highest VISION.
Let's get on a call and connect. There’s no obligation whatsoever, guaranteed!
BEST THINGS come to those who seize the moment.