Manage risk first and then go after profits

Manage risk first and then go after profits: If you’re new to investing, the idea of managing risk might seem counterintuitive. After all, aren’t you in it to make money? The truth is, managing risk is actually the key to long-term profitability. By prioritizing risk management, you can avoid costly mistakes that could wipe out your gains and help you build a sustainable portfolio that grows over time.

Manage risk first and then go after profits

Manage risk first and then go after profits

Here are a few reasons why managing risk should always come first in investing:

1. Protect Your Capital

One of the most important reasons to manage risk is to protect your capital. In the stock market, there’s always the potential for losses, but by implementing strategies that minimize risk, you can help prevent catastrophic losses that could wipe out your entire investment.

For example, diversifying your portfolio by investing in a range of different companies and sectors can help you avoid the risk of putting all your eggs in one basket.

2. Minimize Emotional Decisions

Investing can be an emotional roller coaster, especially if you’re new to it. Fear, greed, and uncertainty can all lead to impulsive decisions that ultimately harm your returns.

By focusing on managing risk, you can take emotion out of the equation and make decisions based on logic and data. This can help you avoid knee-jerk reactions to market fluctuations and keep your portfolio on track.

3. Build a Sustainable Portfolio

Investing isn’t just about making a quick buck; it’s about building a sustainable portfolio that will continue to grow over time. By prioritizing risk management, you can help ensure that your portfolio is built on a solid foundation that can weather market storms and continue to generate returns year after year.

This can help you achieve your long-term financial goals, such as retirement or funding your children’s education.

4. Limit Downside Risk

Investing is always a game of risk and reward, but by managing risk, you can limit your downside potential. For example, implementing stop-loss orders can help you automatically sell a stock if it drops below a certain price, limiting your losses.

By limiting your downside risk, you can help protect your gains and prevent significant losses that could set you back.

5. Focus on the Long-Term

Finally, managing risk allows you to focus on the long-term picture. In the short term, the stock market can be volatile and unpredictable, but over the long term, it tends to trend upward.

By prioritizing risk management, you can avoid getting caught up in short-term fluctuations and focus on the bigger picture. This can help you stay invested over the long term and achieve your financial goals.


In conclusion, managing risk is the foundation of any successful investment strategy. By prioritizing risk management, you can protect your capital, minimize emotional decisions, build a sustainable portfolio, limit downside risk, and focus on the long-term.

So if you’re new to investing, or if you’ve been burned by risky investments in the past, remember to always manage risk first and go after profits second. With a solid foundation in place, you’ll be able to build a portfolio that can generate sustainable returns for years to come.

Since you are suppose to learn to Minimize Emotional Decisions, you might want to read Stoicism: Seneca – The Ultimate Guide to Mastering Life’s Challenges

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