Do you have a personal stop loss?

[CyclingInvestor]

Never. I have kept 95+% in individual stocks since 1993. Retired since 2006. Big market drops are just opportunities to trade a stock that only dropped a bit for those that really got unfairly pummeled (by my evaluation). Always only very high quality stocks (IMO).

[gcgang]

Quote:

Originally Posted by GrayHare I have more of a stop gain, and liquidate enough after a run up to fund my annual spending cash.

+1

I've stopped a lot of gains over the last few years, not reinvesting and selling stock around the edges, but I'm still making new highs.

What was it Baron Rothchild said, "I'll tell you my secret. I never buy at the bottom, and I always sell too soon."?

[Fermion]

Quote:

Originally Posted by CyclingInvestor Never. I have kept 95+% in individual stocks since 1993. Retired since 2006. Big market drops are just opportunities to trade a stock that only dropped a bit for those that really got unfairly pummeled (by my evaluation). Always only very high quality stocks (IMO).

Big name stocks that have been around for ages. Bear Stearns, Kodak, Sears, those type.

[Ted_Shepherd]

Quote:

Originally Posted by Danmar Never. Buy and hold for me. Didn't even do a trade last year. Will do maybe 4 this year. My view is the less you trade the better you are likely to do.

My policy is just like yours. Someone can see what that has meant for my wealth simply by looking at the performance of the S&P500 since I was 40, 1980. The volatility does not prompt me to buy or sell. It's LTBH for me, though I don't do any buying now that my paychecks have stopped coming in. That was in 1993. (Retirement is wonderful except for deaths among people I loved and some health problems of my own in aging.) My "exit strategy" is to hold the retirement stash as if in trust for the next generation. They will come into possession of it when I die. (Started to say something cute like "when I reach room temperature.") Meanwhile, I manage it to preserve its purchasing power after the annual hits of my living expenses and income taxes, though I can't do this perfectly, given market volatility. IRS requires me to take money out of my IRA each year and pay income taxes on that distribution. That means that I have to do a little selling in my IRA each year. That imposes a requirement that I come up with a selling strategy within the IRA, replenishing its cash, though I know very well that I do not know how to time the market. IRS does not require me to spend that withdrawal (after tax). Sometimes I spend it; sometimes I reinvest it. IRS doesn't care.

[Which Roger]

I'm as Boglehead as they come, but in 2008-2009, I told myself that I'd capitulate and get out of stocks if the market dropped 70% from its high. But I'm not sure I really would have pulled that trigger, and fortunately it never got to that point.

There is a lot of evidence that the market has momentum - if it's up today, it's more likely than not to go up tomorrow, and vice versa. So, absent trading costs, selling everything after a down day, and getting back in after the next up day is a rational strategy. But in the real world, trading costs more than offset that advantage.

[Danmar]

Quote:

Originally Posted by Ted_Shepherd My policy is just like yours. Someone can see what that has meant for my wealth simply by looking at the performance of the S&P500 since I was 40, 1980. The volatility does not prompt me to buy or sell. It's LTBH for me, though I don't do any buying now that my paychecks have stopped coming in. That was in 1993. (Retirement is wonderful except for deaths among people I loved and some health problems of my own in aging.) My "exit strategy" is to hold the retirement stash as if in trust for the next generation. They will come into possession of it when I die. (Started to say something cute like "when I reach room temperature.") Meanwhile, I manage it to preserve its purchasing power after the annual hits of my living expenses and income taxes, though I can't do this perfectly, given market volatility. IRS requires me to take money out of my IRA each year and pay income taxes on that distribution. That means that I have to do a little selling in my IRA each year. That imposes a requirement that I come up with a selling strategy within the IRA, replenishing its cash, though I know very well that I do not know how to time the market. IRS does not require me to spend that withdrawal (after tax). Sometimes I spend it; sometimes I reinvest it. IRS doesn't care.

This post mostly reflects my view. I guess not surprising as you started off by agreeing with me,. My portfolios are all taxable though, so it's much simpler. I also view my portfolio as "in trust" for my heir, although I am thinking now that maybe just holding it at this level, inflation adjusted, might be a good strategy. Otherwise, we are probably underspending. Very good problem to have.

[Chuckanut]

Here's my plan:

If stocks fall, I will sell them.
I won't buy them again until they go up.

What could possibly go wrong?

[flintnational]

No. We have stuck with our asset allocation through the 1987, 2000 and 2008 downturns. At the bottom of the 08 downturn, our NW was down 7 figures. If I were still working and contributing to a 401K, I would hope for a significant down turn (AKA a buying opportunity). If I could not stomach a potential downturn, as others have stated, I would adjust my allocation to a point that I would not be tempted to sell.

[Blueskies123]

Starsky, what if there is a 40% flash crash and your stop loss is not filled at your 12-15% but at the 40%? Then by the end of day the market has fully recovered?

[CyclingInvestor]

Quote:

Originally Posted by Fermion Big name stocks that have been around for ages. Bear Stearns, Kodak, Sears, those type.

I do not invest in "sicker than a dog" stocks just because they have been around a long time, only those that meet my standards. Financially sound, strategic decisions that I agree with, focused on their areas of expertise - like JNJ, PG, WMT, XOM, etc.

[Montecfo]

I think if you have a stop loss figure then your asset allocation is not on sync with your risk tolerance.

Number one rule of investing in my opinion is "stay fully invested".

[Starsky]

Quote:

Originally Posted by Blueskies123 Starsky, what if there is a 40% flash crash and your stop loss is not filled at your 12-15% but at the 40%? Then by the end of day the market has fully recovered?

I'll take that chance. I'm sure there are a lot more examples of 5-15% fluctuations than 40% in a day; and if it's going down 40% it's not recovering overnight. AFAIK, there are exactly zero historical examples of this happening in the first half of the year. If it does, we're in for something real.

Bad stuff happens in the second half of the year. My Q3-Q4 limits are very tight right now - today they are less than 5% - and will probably start to trigger in the next couple of days/weeks. I'm far more likely to get out early than late; in fact, I would expect to be out completely in a couple of weeks if the current situation continues to deteriorate. I'll still have a nice profit for this bull run and sleep very well at night. If it keeps going up, I'll just keep my adjusting my targets upward.

I just don't see a lot of upside in the market between now and the end of the year, and I've been burned more times than not for being greedy. (My PM is definitely loving it tho! ) There are times when a 3% guaranteed return starts to look pretty good...

[tdv2]

Quote:

Originally Posted by Starsky I'll take that chance. I'm sure there are a lot more examples of 5-15% fluctuations than 40% in a day; and if it's going down 40% it's not recovering overnight. AFAIK, there are exactly zero historical examples of this happening in the first half of the year. If it does, we're in for something real. Bad stuff happens in the second half of the year. My Q3-Q4 limits are very tight right now - today they are less than 5% - and will probably start to trigger in the next couple of days/weeks. I'm far more likely to get out early than late; in fact, I would expect to be out completely in a couple of weeks if the current situation continues to deteriorate. I'll still have a nice profit for this bull run and sleep very well at night. If it keeps going up, I'll just keep my adjusting my targets upward. I just don't see a lot of upside in the market between now and the end of the year, and I've been burned more times than not for being greedy. (My PM is definitely loving it tho! ) There are times when a 3% guaranteed return starts to look pretty good...

Even if it was that simple to get out and subsequently back in based on a percentage which of course it's not, what about the taxes you have to pay and the loss of dividends while sitting on the sidelines? Say the market chops around up and down 7% for a few years, how does your model react to that?

[Blueskies123]

While I have not used stop losses thousands of times over many decades my limited experience (3 times), all my stop losses were executed at some point, usually within a few days or weeks, only to find the stock fully recovered a month later.
It is one of reasons I moved to ETF's that can be sold from phone any time I want.

[Starsky]

Quote:

Originally Posted by tdv2 Even if it was that simple to get out and subsequently back in based on a percentage which of course it's not, what about the taxes you have to pay and the loss of dividends while sitting on the sidelines? Say the market chops around up and down 7% for a few years, how does your model react to that?

Taxes and dividends are not a big concern for me in my IRA. I don't typically have a lot of dividend stocks, I like growth, and there are no taxes to worry about until later. All my Wall Street investments are in our IRAs with the exception of about $150K that I have liquidated most of and converted to PM and cash - I'll happily take the tax hit on that. It's a lot of assets in the market tho - over $1.2M - and I want to keep it, not give it back to the Street.

FWIW, most of my wealth is in rental property. My 'model' doesn't depend on my stocks at all. It's all a safety net. I don't mind missing out on the market for awhile because I don't depend on any of my stocks for income. If I get out now, I'll probably get back in in January and see what happens. If the market's up and down for awhile, it really doesn't really matter if I'm in or not. I would definitely choose a different AA in that case, probably date-targeted retirement funds.

This is not a technical call, just a gut one from years of experience and a desire to try something a bit more conservative for a change. Sacrificing July-Dec returns for a year isn't a huge loss and I don't see a lot of good news on the horizon. We've done very well this year. If someone could explain why the market is doing so well in a totally crap economy, maybe I'd stay in.... people get so used to Bull markets, they forget that for about 10 years, stocks went nowhere in the early 2000's. My 401K sucked for a long time and took years to recover from the big crashes. I don't have that kind of time to recover now or the desire to play that game.

[Starsky]

Quote:

Originally Posted by Which Roger There is a lot of evidence that the market has momentum - if it's up today, it's more likely than not to go up tomorrow, and vice versa. So, absent trading costs, selling everything after a down day, and getting back in after the next up day is a rational strategy. But in the real world, trading costs more than offset that advantage.

At $5 a trade?

[gayl]

Not that I suggest anyone follow me BUT:

IRA = no stop loss as I do not anticipate withdrawing prior to RMD

Roth, Legacy = just let it roll thru as I never plan on taking it out bc it's the kids & grandkids inheritance. Too easy for me to jump out at the wrong time and back in at the wrong time. Safer this way in the long run as I am notoriously bad at timing

Brokerage = established at the point that I get in. But I use a trailing stop. I know a lot of advisers don't like that but I sleep better at night. I usually leave it at a 10% drop. So I've been bumped out of BAC once this year.

[tdv2]

Quote:

Originally Posted by Starsky Taxes and dividends are not a big concern for me in my IRA. I don't typically have a lot of dividend stocks, I like growth, and there are no taxes to worry about until later. All my Wall Street investments are in our IRAs with the exception of about $150K that I have liquidated most of and converted to PM and cash - I'll happily take the tax hit on that. It's a lot of assets in the market tho - over $1.2M - and I want to keep it, not give it back to the Street. FWIW, most of my wealth is in rental property. My 'model' doesn't depend on my stocks at all. It's all a safety net. I don't mind missing out on the market for awhile because I don't depend on any of my stocks for income. If I get out now, I'll probably get back in in January and see what happens. If the market's up and down for awhile, it really doesn't really matter if I'm in or not. I would definitely choose a different AA in that case, probably date-targeted retirement funds. This is not a technical call, just a gut one from years of experience and a desire to try something a bit more conservative for a change. Sacrificing July-Dec returns for a year isn't a huge loss and I don't see a lot of good news on the horizon. We've done very well this year. If someone could explain why the market is doing so well in a totally crap economy, maybe I'd stay in.... people get so used to Bull markets, they forget that for about 10 years, stocks went nowhere in the early 2000's. My 401K sucked for a long time and took years to recover from the big crashes. I don't have that kind of time to recover now or the desire to play that game.

That make more sense...I guess. What I hear you saying is that your gut is telling you there is going to be a correction and that it will last until January. Personally, having been investing for a long time, my choice is to have an asset allocation that suits my risk tolerance at the current point in my journey. I have substantial assets outside my 401k's (more that 2/3 of my total NW) so taxes are an issue for me.

Personally I'm not willing to take risks that rely on gut feelings. As I have said before, I am my own worst enemy and that what I have learned is I am over confident in my ability to time or pick individual stocks. I would only expect to be right 50% of the time at best on getting in and out so it's no advantage for me. What I do know for certain is that if I own the whole market in a low cost index I can do better than 75-80% of investing community net of fees and taxes.

[PoorOldCountryBoy]

OTM put options are a very cheap insurance. Even that is not necessary if holding more than 10 years.

[ERD50]

Quote:

Originally Posted by gayl Not that I suggest anyone follow me BUT: IRA = no stop loss as I do not anticipate withdrawing prior to RMD Roth, Legacy = just let it roll thru as I never plan on taking it out bc it's the kids & grandkids inheritance. Too easy for me to jump out at the wrong time and back in at the wrong time. Safer this way in the long run as I am notoriously bad at timing Brokerage = established at the point that I get in. But I use a trailing stop. I know a lot of advisers don't like that but I sleep better at night. I usually leave it at a 10% drop. So I've been bumped out of BAC once this year.

So how does this help you? You sold BAC at 10% below some number (not sure how that was determined - recent high, purchase price, 200 day moving average, other?). When/what did you sell it at? Where is it now?

It just seems like a prediction, but I can't see any basis for the prediction. So BAC dropped 10% from X? What does that say about its prospects to go lower (OK, you may have protected yourself from a further drop), or to just go higher (you sold low)? Seems like the odds are about 50-50 on that.
An individual stock is generally more volatile than a basket of stocks. Selling on 10% drops seems to just be locking in losses, going to cash, and then waiting for...what? How do you decide when to get back in?

I just don't follow the strategy.

-ERD50