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CAPS / Lessons from CAPS
|Subject: Re: Protecting your Downside with a Stop Loss||Date: 10/8/2007 10:32 AM|
|Author: HelicalZz||Number: 68 of 182|
This is by no means sage advice - but I can comment on how I've used stop losses.
First, note that while Buffet's 'Rulez' get quoted a lot, he also comments that investors have to be willing to accept and expect their holdings to drop in value from time to time (don't have a quote).
So, stop losses.
Rule #1 (kidding) - Don't use them when you buy a stock.
If you don't want to buy more of the stock when it gets cheaper - then why are you buying it now? Expect your stocks to go up and down - it is reality. This past summer was a good psychological shake out for investors IMO, and I'm certainly glad I didn't have stop losses on my holdings.
I will occasionally use them when I think a stock has gotten a bit rich in valuation, at least for a portion of my holding in the stock. If I've had a nice run in a stock, and certainly wouldn't be adding at the current price, I might set a stop loss for 1/3 or 1/2 of the position to insure I don't give back those gains. You never know ho