A governor, or speed limiter, is a device used to measure and regulate the speed of a machine, such as an engine. I have taken that concept and applied it to finance. You put in place a governor that limits the speed at which you could potentially lose money.
Here is how I apply it:
- I do not buy disposable products. Why throw money in the garbage?
- I place stop loss orders for every stock/ETF I own at 4.5% below its cost basis. My upside is not capped but my downside is.
- I use alternative income streams rather than bet everything on a single business venture.