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Author: maniladad Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41627  
Subject: Re: A learning curve Date: 10/16/2012 12:08 AM
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ThyPeace, I'm a little late to the party but wanted to make a couple of comments. I tried using stop-loss orders on the advice of someone more knowledgeable than I (which includes just about everyone). I went back and compared my results with what would have happened if I hadn't used the stop orders. End result, about the same either way. I had a couple of stocks that fell to my sell level and then went up a lot and others that fell below my sell price and stayed there. What I didn't experience was the situation where a stock price falls precipitously, sell orders back up and your stop-loss order doesn't get executed until at or near the bottom. In short, the stop-loss order can enable you to automatically and immediately do what you did over a longer period when you rode a stock to the bottom and then sold. Ain't technology grand! (I had a similar experience with a low-ball limit order on MAKO, which fell so sharply that my buy order didn't get executed until the price had dropped several dollars below my limit. Some days you get lucky.)
My limited experience is that stop orders do not work as well with volatile stocks or during volatile markets as they do in more stable situations.
Some have suggested that you should set your stop loss at or a bit below the 50 day moving average for your stock since some use falling below that level as an indicator of a broken support level. I'm more inclined to buy stocks for the long-term as you have and sell only if the reasons I bought the stock no longer apply. Stop orders don't add much to that.
The one place I've found stop orders can be helpful is when I think a climbing stock is overvalued and due for a big drop and I'm ready to sell. In that case I sometimes set a trailing stop near the price to try to ride it up a bit farther before the stop order is activated. Sometimes this gets me a little better price, sometimes it just gets me out of the stock at a price a little less than I would have gotten if I'd just sold it myself.
I believe you said that you were 65 years old. Most professional financial advisers advise switching to a higher percentage of fixed income investments as you get older. I think that under present circumstances your portfolio of proven dividend payers is preferable. My finances would be in much better shape if I had done that for the past 50 years instead of letting professionals manage my investments for me.
Professional financial advisers are under pressure to perform and tend to keep 100% of their money invested in equities. For a long time I felt the same pressure. Now I agree, as Denny suggested, that keeping cash or very liquid investments available for the bargains that appear from time to time makes more sense for the individual investor. This of course, is in addition to anything that you set aside for personal emergencies.
Most people hurt themselves by selling winners too soon and holding losers too long. It sounds like you've had a winning strategy for a long time. I suggest that you consider continuing to do what you have done. Sometimes the opposite of good is better.
As far as getting alerts based on RMS, I think it's unlikely. The BMW method, with its emphasis on CAGR, is not widely appreciated. We're fortunate to be among those who are aware of it.
Congratulations on accumulating an enviable portfolio!
D
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