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 try not to 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. Collecting aluminum cans, getting paid to read email, getting paid to watch Internet ads, getting paid to search, and getting paid to post tweets has no explicit downside risk