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BUCKLE UP, CHECK ALL GAUGES AND GET READY TO TRADE

by Uncle Bob Williams

A checklist system covers all the bases and protects your investment from the detriment of emotional decisions.

view: Trade Checklist screen shots

Let's think about surgeons and airline pilots for a minute. Day after day, they're in charge of life-or-death situations; if they slip up or skip a step, the consequences will probably be dire. So how do they minimize risk in a high-risk process? They use checklists, and they carefully stick to them.

Investing your hard-earned money involves risk: one slip and you can lose it all. That's why Uncle Bob's Money has developed a thorough checklist that we use in making trade decisions. We have a separate checklist for monitoring your investments' status at all times in order to keep errors at bay and minimize risk.

Look at this example of the effectiveness of checklists: With a goal of eliminating bloodstream infection within all ICUs in Michigan, that state has been using a five-point checklist to safeguard the common procedure. It's been remarkably successful in its three years of use, with the rate of infection close to nil. Of course, it works not because the checklist was created, but because those performing the procedures absolutely hold to it. And that's exactly what we do in managing your investment moves at Uncle Bob's Money: we do it by the book.

It's human nature to protect what belongs to us and to avoid loss, from the time of the Cro-Magnon defending his shelter and food to today's investor keeping a close eye on his portfolio. That's because we have specialized neurons in our brains that function as predictors of patterns that allow us to anticipate what will happen. In terms of trading, this can get us into trouble. Those prediction neurons are what compel an investor to buy stock in a favorable market; the problem is he doesn't pull the trigger until the market has peaked. He gets caught high on that peak, with a bird's-eye view of the market as it slips back downward. In the same way, he panics as the market slides, and his reaction is to sell fast to stave off the "inevitable" loss.

That's the real value in the checklist, as part of Uncle Bob's Money's whole system. It transcends the hard-wired reactions that are valuable in the survival of the species but detrimental to the well-being of your investments. Our practical, proven system takes emotions out of the picture, allowing your money to safely and predictably grow.

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