The golden rule, which seems to apply to everything in life, is to give whatever it is that you want to receive. If you want something, then give it away. If you want to really experience something, then give it away. If you want abundance, give it away. If you want love, give it away.

Most of my clients learn this through the consulting process—especially with respect to mental states. Whatever mental state you give away, you get back yourself even stronger. Thus, if you give out fear, your internal fear increases. If you give out love, the love inside of you increases.

At Christmas time we are particularly preoccupied with giving. What do I get Aunt Sue? She gave me a tie last year; perhaps I should give her a scarf. What should I get for Uncle Alex? He plays golf, so perhaps some new golf balls.

Some of you probably enjoy giving. Some of you probably enjoy receiving. Some of you may enjoy both, while some of you may hate both. Yet such giving should not be done with the expectancy of receiving. Instead, it should be done with the joy of giving.

Merry Christmas, from all of us at the Van Tharp Institute.

Posted by Van K Tharp at 06:02 PM | Permalink | Comments (0) | TrackBacks (0)

Q: If a stock is a real winner, and if it was purchased using a 1% risk with a 25% stop, as it rises in value the risk will increase beyond 1% if a 25% stop is adhered to or the stop will get tighter if the 1% risk is adhered to. This assumes the whole portfolio is not growing by a similar amount. Example: I bought a gold position at $4800 with $1200 risk and a 25% stop. That position is now worth $12,000 and my 1% risk is now $1280. If I manage to the risk (never wanting to risk more than 1% on any one position) I will get stopped at a 10.7% trailing stop. If I manage to the 25% stop then my risk or loss will be $3000 or 2.3% of my total portfolio.

My objective is to get a 10-12% return using a newsletter strategy and being as conservative as possible. Thus, I manage to the 1% risk and let the stop tighten as a stock strengthens. I'm wondering if this is a prudent strategy or if it's best to always stick with the 25% no matter what.

A: You are misunderstanding the 1% position sizing. If you have $100K and you risk 1%, you are risking $1000.
But since your stop is only 25% of the value of the stop, your total investment is $4000.

What's important is that you keep a 25% trailing stop. Let's say you started with a $20 stock with a stop
at $15. The stock now goes to $60 with a stop at $45. Let's say it is your only investment.

You have $96K in cash. You position is now worth $12K so your total equity is $108K. Your stop is
now at $45, so you have $3K worth of risk-- which is nearly 3% not the original 1%. I've never said
anything about scaling out to keep the total risk at 1% -- just the initial risk.

Posted by Van K Tharp at 07:00 PM | Permalink | Comments (0) | TrackBacks (0)