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Do you have a personal stop loss?
Old 06-15-2017, 06:12 AM   #1
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Do you have a personal stop loss?

I really hated seeing my 401K drop like a stone around 2000, and decided then to not let that happen again. It paid off as I pulled my money back as the 2007/8 pullback occurred, but I was slow to get back in and lost out on some gain in 2009.

For me, if I see the market pull back over 5% I plan to move everything into my 401K's safe fund, and hunker down. It would be too painful to see my 401k drop below 7 figures.

Anyone else have a similar mindset?
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Old 06-15-2017, 06:54 AM   #2
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5% is too low, that can happen on a whim, my cut off is 12% for my 401k and individual stocks, 18% for my other investments. That is true for all my investments individually, not as a "market". ie. BMY was sold when it tanked this last year.
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Old 06-15-2017, 07:00 AM   #3
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......................

For me, if I see the market pull back over 5% I plan to move everything into my 401K's safe fund, and hunker down. It would be too painful to see my 401k drop below 7 figures.

......................................
You didn't give us the other part of the magic formula: when do you get back in?
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Old 06-15-2017, 07:09 AM   #4
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You didn't give us the other part of the magic formula: when do you get back in?
Yea, that is the hard part. As I stated I did well in 2007/2008, getting out in time and then playing games with the company stock as the market started to recover (something like 18% over that period). But I got caught flat footed in 2009 and was slow to get back in and only made like 6%, when the market was up around 12%.

I think the answer is I would get back in when I sensed the momentum had shifted, and that would most certainly be too slow:-)
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Old 06-15-2017, 07:32 AM   #5
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Everyone should have given some thought to their Exit Strategy....that's simply Market Awareness. But at 5% you would be whip-sawed out of the Market on several occasions, for no valid reason. At 18% the damage would have been done to your portfolio and you'd likely miss the upswing.

I like to watch the SP500 with a 50-day moving average and a 200-day MA overlay on the chart. When the SP500 breaks below the 50-day MA...it's Head's Up Time. No action is needed, just be alert for other signals. The SP500 has closed below the 50-day a few times this year, as recently as May 17th. But a one day close below is not a reason to jump ship. Now if a decline were to take the SP500 below the 200-day MA, I would think about a move to safety.
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Old 06-15-2017, 07:38 AM   #6
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Nope. If I foresaw an inevitable total collapse then I'd take steps to mitigate the damage, but I don't anticipate gaining psychic powers so I doubt that will ever happen. My exit strategy is to slowly move to more conservative investments as I get older and to spend from my investments in retirement.
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Old 06-15-2017, 07:45 AM   #7
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If you do not have a strategy to get back in your plan will fail. Even 10%-12% could happen in a few hours. Like FiveDriver said I watch the 200 day moving average, interest rates, inflation, and employment. If the majority of these are heading south I will probably already be down 15% but I will exit at that point and get back in when they turn up.
Your current plan will not work, once you have a better plan you should back test it.
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Old 06-15-2017, 08:33 AM   #8
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I was thinking you were going to ask about stop loss orders instead of a certain % drop...


No, I do not have a % that I think 'man, I need to get completely out of the market'.... that is market timing... I use my AA to take care of the ups and downs....

Now, I will admit that I play a bit around the margins... IOW, I might change a more risky fund for a less risky fund or I might sell a bit to increase my cash so I can hopefully ride the downturn out... but 95+% of my investments stay the same...
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Old 06-15-2017, 08:43 AM   #9
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My AA takes care of any stop loss.

BTW if you thought your 401K dropped like a stone in 2000, ask those of us who had 401Ks on October 19, 1987.
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Old 06-15-2017, 08:50 AM   #10
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My stop loss was different. A few days after 9-11, the US Army notified every soldier eligible for discharge or retirement that stop loss was being invoked - no one getting out. Stop loss was lifted (for me) in 2004. I had to hand carry my retirement request to the commanding general and explain why I wanted out. But out I went. Opted to stay out of that "market."

But to the OP; we have a couple of pensions that cover most of the basics and modest portfolio for the gap (and the gravy and dessert).
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Old 06-15-2017, 08:55 AM   #11
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No, I don't have anything one might call a "personal stop loss". That would certainly put one in the DMT group, and my crystal ball was never that good.

I've ridden every bump so far. Admittedly easier to do when all my spend was coming from a W2. This time, I've adjusted my asset allocation to be a little more conservative based on the 'not universally agreed upon' indicator of CAPE/PE10 being at historical highs. But that's as close to being a DMT as I plan on getting.
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Old 06-15-2017, 08:59 AM   #12
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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.
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Old 06-15-2017, 09:11 AM   #13
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None stop loss for me. My target asset allocation determines how much I rebalance.

If the market goes south, that's when I tell myself to remember how many more shares I'm buying with each rebalance.

My emotional strategy is when a bull market, admire the portfolio balance. When in a bear market, admire the number of shares .
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Old 06-15-2017, 09:38 AM   #14
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None stop loss for me. ...
+1

John Bogle:

"The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently."

Charles Ellis:

"Short-term market timing is a loser's game. None of us know what tomorrow holds, not Bogle nor anybody else."

And yes, I was there for 1987 and all the subsequent rides. Never sold a single thing, though since I was near 100% equities for most of them, rebalancing was not an issue. The market has always come back.

Right now, I have an AA that I am happy with but I will be a mid-six-figure equity buyer if/when we see a 20-30% pullback. I expect that I will be buying from the stop-loss crowd.
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Old 06-15-2017, 09:41 AM   #15
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No, I just try to make up for it by rebalancing after I have taken a beating!
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Old 06-15-2017, 10:19 AM   #16
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Nope, I don't submit stop-loss orders and I don't sell when things go down a lot.

Instead, I have my brokers send me an alert to my cell phone when something has dropped quite a bit and then I make a decision to buy low at that time or to wait.

Since I am not 100% equities, I always have bond funds that I can sell in order to buy equities low.

I expect my equities to drop at least 10% at some point every year (like in 2016), so that I can buy low.

Selling with a stop-loss? I think that is insane.
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Old 06-15-2017, 10:23 AM   #17
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I have more of a stop gain, and liquidate enough after a run up to fund my annual spending cash.
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Old 06-15-2017, 10:32 AM   #18
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I have more of a stop gain, and liquidate enough after a run up to fund my annual spending cash.
I never like the idea of personal stop loss, that's a guarantee way to lose. The ideal way is to sell when it goes up, at least a bit nibbling. But make sure you are discipline enough to buy back.
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Old 06-15-2017, 10:36 AM   #19
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Agree that automatic stop loss orders are insane, because mini-flash-crashes will take you out and leave you in the sidelines. Just last Friday Amazon has a flash crash that lasted 3 secs then jumped back up.
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Old 06-15-2017, 10:36 AM   #20
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IIRC, Value Line, when I was a subscriber years ago, recommended selling at an 8% drop in value.
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