Jim Niedelman:
Time now for this week’s, 4 Your Money. David Nelson, CEO of Nelsoncorp Wealth Management is here. Great to see you again, as always.

David Nelson:
Thank you, Jim. Appreciate it.

Jim Niedelman:
You spend a lot of time with us driving home the point about risk management. Now we’ve seen the last 10 years a bull market. How do you approach that conversation about risk now? What options are there for people watching at home to apply some risk management?

David Nelson:
The second question I’ll get to as far as several of the tools, but big picture concept, I want to make sure that people understand and that is nobody should be rushing for the door as far as just because they made money, but they need to be aware as far as what they own. What they own, for most people that have had really, really good returns, has been stocks over the last 10 years. And the bonds have been quite good as well considering the amount of risk that you’re taking. It’s assessing that and then it’s building from there. What tools and what instruments are available, and again, there’s many things people can do.

Jim Niedelman:
Let’s talk about the next question then. What options are there for people who want to apply that risk management?

David Nelson:
Let me pull up the slide here if we could. Again, the visual here, I’ll just try to walk us through it as quickly as we can-

Jim Niedelman:
We’re good.

David Nelson:
… and make some sense out of it. Bottom line, the bell curve here, we find ourself in the eight to 10% range is typically what things are going to-

Jim Niedelman:
That’s the norm where people fall I’m sure.

David Nelson:
That’s the norm. Exactly. For stock gains as well as potential losses that we’re looking at here. We’ve got a chart over here. Diversification is the level one. Diversification for most people is stocks and bonds. That’s typically what most people, and they kind of in there.

David Nelson:
Tactical strategies are very important. That would come in where the losses start getting bigger. That’s essentially saying at certain points in time when this happens, I want to sell this, and I want to buy something else. It’s a tactical move. Now we’re going to look at hedging. The hedging starts coming into play again. At some point, 20, 30% down. These hedges can be a very wonderful instrument. The best example is insuring your house. When you insure your house, you’re hedging. You’re betting that the house is going to burn to the ground as bizarre as that sounds. The insurance company is betting it isn’t. That’s a type of hedge. You can do that as far as [Crosstalk 00:02:00].

Jim Niedelman:
Protect yourself in those extreme situations.

David Nelson:
Exactly, exactly. Then the last is just to go to cash. That’s probably the simplest for people to understand. And again, at times, that may make sense, and-