Stop Loss

gadgetmind

Linton wrote: »

I and most long term investors, as opposed to traders, dont use stop loss.

Agreed. If you think you paid the right price, why would you care if others later are prepared to sell at a lower price?

I once heard stop losses compared to someone buying a house and then instructing the estate agent to immediately sell it again should anyone offer less than 90% of what they paid.

Glen_Clark

:beer:

fezziwig wrote: »

Well here's one example, BT.


When the FTSE 100 peaked at near 7000 in Jan 2000, BT peaked at 1500p. A blue chip share that certainly didn't look a "risky gamble" back in those days. It's subsequent market slide made Tesco's recent problems seem like a splash in the pan. Dipped to a miserable 78p in Jan 2009. Even after it's recent better days it's only managing 410p.


You also say .... "I and most long term investors, as opposed to traders, dont use stop loss."

But fine words butter no parsnips as the saying goes. Even a half decent stop-loss strategy would have saved the poor old BT investor a bundle if they'd bought shares anywhere near the peak.




and you go on to say..... "If you are investing sensibly rather than punting on risky gambles why would you want to sell when the price has dropped?"
To save yourself from even heavier losses if the price continues to fall.


If you're only tracking major indexes then of course the risk is massively less over the long term but for anyone investing long term in so called blue chip shares, I'm not convinced that stop-loss isn't worth bothering with.

Well of course you can cherry pick a share and a period to show your strategy would have worked in that particular situation...
Move on a bit and if you had bought it at 78p, and sold at the first dip, you would have missed the rise to 410p.
The ones who beat the market are those like Warren Buffet who have the resources to research what the shares are worth, and then wait till they reach their true value ignoring the blips along the way. Those of us who can't research what the shares are worth are safer buying a cheap index fund, or an Investment Trust on a big discount if available.

Thrugelmir

fezziwig wrote: »

As we know, stock prices tend to rise relatively slowly over years but take only days to plummet, so making use of Stop-Loss seems to be a no-brainer.

Markets reflect news and trends. However within this individual share prices can bounce around in minutes. So indices hide a multitude of different stories.

gadgetmind

Heedtheadvice wrote: »

I wish I had a stop loss set for some banks!

Yes, hindsight is a wonderful thing.

So is avoiding overexposure to a single sector.

dealer_wins

gkerr4 wrote: »

The days of buy and hold are long, long gone.

Nope, unless trading (gambling), for your average investor buy and hold is the best strategy, always has been the best strategy, and always will be the best strategy!!

Thrugelmir

dealer_wins wrote: »

Nope, unless trading (gambling), for your average investor buy and hold is the best strategy, always has been the best strategy, and always will be the best strategy!!

Along with reinvesting the income. Not into existing holdings though.

gadgetmind

As long as you're properly diversified, I can't see any problem with reinvesting income within your existing holdings, though you obviously don't use the dividends/income from Asset A just to buy more asset A.

I let income accumulate and then (usually when adding fresh money) rebalance. This involves buying anything that's significantly below my target allocation, but can sometimes mean selling something that's getting a bit giddy.

gkerr4

TheTracker wrote: »

Please explain.

well - just as it says - the days of buying a share and locking the certificate away in a drawer and forgetting about it and hoping that some day in 15 or 20yrs time it is worth more.

technology is disruptive - companies need to adapt or they die (not just talking tech sector).

Jim cramer, in his books, preached a new mantra of "buy and homework" - keeping up to date with markets, macro and companies stature. I believe in this.

gkerr4

dealer_wins wrote: »

Nope, unless trading (gambling), for your average investor buy and hold is the best strategy, always has been the best strategy, and always will be the best strategy!!

sorry - but this is just typical of this forum - "investors" always claim that anything other than buy and hold is "gambling". total rubbish and so outdated.

gkerr4

Linton wrote: »

What investment have you held that continued to fall beyond the normal ups and downs of the market?

well, it would be common in a speculative stock - for example, a small drug company or perhaps a commodity exploration company - these occasionally go to the wall and the stock ends up at zero.
But speculation is only a small part of my portfolio so the risk is managed and the impact of a "worst case" is survivable. No more than 2% of capital at risk in a speculation scenario.

On others, well i'd consider that my money is able to work better for me elsewhere while that 'dip' was occurring - i might look for a lower entry point if i believe in the stock for example.

I can't (obviously) say it works 100% for me, but it does work well and i regularly bank profits and my annual returns are positive and have been for many years.