We’ve received a lot of questions and comments from subscribers in the past few weeks. In general, most are centered on one idea: What to do about the volatility the market has experienced since the start of the year.

These questions and concerns are understandable. After all, owning a solid investment does nothing for you if you can’t sleep at night. So I decided to address these questions by talking about an idea that many investors ignore all too often.

#-ad_banner-#I’m talking about risk management. 

You see, I can’t think of a single investor I know who’s better at managing risk than my colleague Amy Calistri.

This especially serves her well when it comes to her premium newsletter, The Daily Paycheck. At roughly 60 holdings across the portfolio, and with a mandate to use the power of dividend reinvestment to grow that portfolio into a robust income stream, it’s imperative that she watch each and every one of those holdings like a hawk.

As Amy puts it, managing the risk in her portfolio is a far better use of her time than actually worrying about what’s going on in the world or in the market. Here’s a little dose of sanity she dished out to her readers back in mid-December:

With that kind of perspective, it’s easy to see how Amy can stick to her guns during a selloff. She knows her dividend reinvestment strategy works. It’s enabled her to grow an initial portfolio of $200,000 into one worth nearly $300,000. And she was able to earn an impressive $19,449 in dividends last year in the process. So when things get rough in the market, there’s no reason for her to abandon ship completely.

Instead, Amy’s doing the best thing she can possibly do: sticking to her Daily Paycheck system, not overreaching for yield, and trimming her exposure to risk in the market. That’s also one of the reasons why her portfolio has been shown to be 33% less volatile than the overall market.

Here’s what she said about limiting risk in a recent update to subscribers:

Amy accomplished this by selling two holdings in her newsletter. They each admittedly made up a small portion of the overall portfolio… But hey, just a few percentage points can go a long way.

“In my 30 years of investing experience, I’ve gotten really good at limiting losses and managing risk. I still haven’t figured out how to eliminate both,” Amy said to me recently. If you’ve known Amy as long as I have, then you can read between the lines of that statement and realize that she knows she never will.

Instead, Amy plans to profile two dividend-paying companies from one of the safest sectors on earth in her next issue of The Daily Paycheck. One company is a Dividend Aristocrat — having raised its dividend every year for at least the last 25 years. The other company is a small up-and-comer, looking to go national.

Bottom line: Rather than feel paralyzed by a whipsawing market, prune your portfolio like you would a prized garden. Trim the holdings that are vulnerable, and carefully add when you see an opportunity too good to pass up. Your portfolio will be more likely weather the storm and come out the other side healthier than ever.

If you’d like to learn more about how Amy reduces risk and builds one of the most impressive income streams you’ll ever see, then I invite you to learn more about her strategy here.