Stop Losses

There is an irony with the 'buy and hold forever' method. Many older people who use this have pre-CGT shares and are loathe to use stop-losses.

Funnily enough I have just seen one protfolio where since the 80's, at least 1/4 of the companies had 'failed', 1/4 had been taken over at a loss (without rollover), 1/4 are very ordinary and about 1/4 are still stars.

Yet given most shares were acquired at around 50 cents, even the surviving dogs are worth $20, and yet look at BHP !! Wouldn't you like a significant pre-CGT holding in this ??

In all, after tax this portfolio is a very effective long-term investment. Even post-CGT they outperform residential property investment over the same time by a few percent.

Of course, I am not recommending this as a strategy - except to say that these people fared better than those who don't invest at all. It's the old 'time in the market' scenario.

Cheers,

Rob

 

So I assume all the 'stop loss' guys here got out during the last correction?

 

And imagine you bought coke shares, or CBA shares!

 

Do not worry!
During bear market you'll learn rather quickly what works for you and what does not.
Until than ... have fun.

 

Who knows??

I would've thought many got off the elevators whilst they dropped and then watched, researched and then got on board the fastest rising ones..


MBL had a shocker and is still in the doldrums, though recovering slowly, RIO has bounced back well and I'm sure there's many that are now going *gangbusters*

 

maybe it will be good to hear where people set their stops... is it off previous day close? amount paid? 90 day high?

i dont use stops really because i dont understand them, however i think id be happier to use options rather than stops (if i knew more about either)... options id imagine will give you a +ive in the opition & -ive in the share resulting in near 0 impact. However with an option you will not be stoppped out automatically and if hte share decides to strongly bounce back you still have the exposure (although you will not make any money until it gets past the original level)....

if only i could learn enough to implement this id be happy....

 

Why you can not learn enough if you want to??????

PS - If you can not successfully trade/invest shares - forget options

 

Hi Dave,

I've heard of shares *gapping down* prior to the market opening and stops/triggers not being executed.

A stop could just be a set price that you decide to exit on though, it could be a line drawn on a chart that you have decided to exit on if it gets reached OR breached, it could be a profit stop or a trailing stop

On some of my shares I have triggers set, on others a set price i will exit on and others yet i hold for thier potential without an exit plan..CBA and ASX come to mind

I have my SMSF and its strategies/goals, my direct shares, my IP's and my Managed Funds (only Navra) and strategies/goals for these


Keep in mind though.....I'm absolutely convinced i only know enough to get myself in trouble (and not out of it) I hang around here 'cause there's better minds than mine at work and I recall being told if you're the smartest person in your team...then you're in trouble

On the other side of the coin to trading..i found this interesting

As Dale usedto say

Have Fun

 

"i dont use stops really because i dont understand them,"

Obey the stop signs

 

I have read that before, it explains what a stop is and why it is important, it doesnt explain how to used them effectively, what should be the base of your loss...

im not about to use something which people say is good if i dont know how it works.... In saying that with only 3 or 4 direct shares and this representing less than 20% of my portfolio im not overly concerned, id prefer to place my energy somewhere else at this point in time...