You very well could be at risk because of the following:

If you study what most people do you find out they invest generally in one asset.  Sometimes two or three.  But follow us for a moment.  Most people will be concentrated in either equities or real estate.  While both can be great investments.  The challenge to these high concentration risk investors is they are at the mercy of the market cycles.  For these type of investors they are at the top of the world when things are great.  For the equities investor who stays long and comes upon a bear market if they are not managing their portfolio with strict discipline and exact system they lose tremendous amounts of money.  The same goes for real estate, all is great for that investor when real estate is appreciating.  However, when the cycle changes it can be devastating and can easily become one of the most illiquid asset classes there is.  Each can be great vehicles to grow wealth but without balance the investor is left to be on a roller coaster over their lifetime with each cycle.

There are a small percent of investors that are actually spreading their money a little more than most people.  These investors typically have exposure to equities, bonds and real estate.  That still is only 3 asset classes.  What is even worse is the greatest majority of these investors are always on one side of the market.  What side is that?  They are long.  As these 3 assets move through their cycles they are fully exposed by being 100% long all 3 asset classes.  What happens to their equity as the cycles change?  It drops, sometimes very significantly and extremely fast.

Here is where it gets even worse for investors and can even become a death spiral!

Most people are terrible investors due directly to their emotions and the reactions they cause them to take.  You have to understand these emotions are ancient and designed to protect us from harm, unfortunately, when it comes to investing, they do not serve us anymore as they once did.  Long ago we depended upon these emotion for our very survival.  This very old part of our brain that was designed to insure our survival, actually harms us in the modern pressures of finance we have to navigate in.  Due to this fact most buy and sell at the exact wrong time.  Firstly, most are caught in an emotion cycle with the financial cycle of the asset they are invested in.  It is as if the investment has taken over logic of the investor.  You will hear investors tell stories they knew they should have sold that stock or that real estate but they did not, why?  Secondly, most do not invest with an exact system that removes emotions from the equation completely.  Most investors if they had an exact systematic approach could make much more money.  Most loses investors could have been avoided if they followed a systematic approach to investing and exercised proper risk control along with good money management.  Every loss could have been a small one if this was practiced.

Emotions do not serve you as an investor, in fact they will in the majority of cases cause you to lose money.  Below is the Cycle of investor’s emotions.  This is the result of more than 50 years of studying investor’s reactions to extreme market conditions.   Can you relate to any of these emotional cycles?  Do you understand how these emotions can prevent you from getting the best possible returns on your money?

Is there a better way to invest using alternative asset classes?

What if instead of being invested in 1, 2 or 3 asset classes and just on the long side of the market.  You could also make money on those same asset classes when the cycle was in a bear market too, have you ever wondered about that?  Making money from assets depreciating can result in even faster profits than when they appreciate because assets tend to fall faster than they go up.  Could that make you more money as well as allow you to not experience a roller coaster emotional investment experience?

Now let us take this yet another step that few investors could ever dream possible.  What if you could be invested in 4,5,8 or 10 or more asset classes and realize profits regardless if the market was in bull or bear cycle?  What happens naturally when you are able to do this is why one or two asset classes might not be making you money at that moment in time realize you have your money spread out in many other asset classes that are performing well.

Now that an investor is invested across many asset classes balancing and smoothing out the results he is getting.  What if that same investor took it yet one more step and automated the whole process.  So that decisions on the investments were automated and following very specific sets of rules for entries and taking losses as well as gains.  How much better do you think you could do if that was you?  Who do you believe will do better long term the one invested in 1 to 3 asset classes riding a roller coaster or another investor who is invested in 4,5,8 or 10 or more using completely automated approaches.

Even the best systems can have experience negative returns or major losses because the markets are in some cycle it is not able to perform well.  For example an automated trend following approach for equities will do well in a bear or bull market but begin to suffer losses in a range bound choppy market.  Knowing this is possible, you must do something to offset it.  This is why you understand you must spread your investment capital not only in different asset classes but in different automated systems.  So while a certain asset class or certain type of trading system is performing poorly you have you money earning great returns in other asset classes.  Do you understand how this diversification reduces your risk substantially now in comparison to being in 1,2 or 3 asset class on just one side, long the market?