Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
For the past 2 1/2 years, I have been managing my mother's portfolio. While the generic description of the best strategy is capital preservation, about 25% of her holdings is in stocks that my father bought before he died. I am reluctant to part with them too quickly -- they are in a sector that I favor generally and have continued to perform quite satisfactorily.

What I am considering is using the notion of a stop loss or a stop limit as a mechanism by which she can continue to profit from the growth while, I hope, limiting the downside potential.

Hence, my question. Is a stop loss or a stop limit an appropriate device to use under the circumstances? I have some understanding, but need to know precisely what the difference between the two is. When does one choose one or the other? What risks do I face if I elect to use one or the other? And what is the effect of a stock split -- all of the stocks have split in the past several years (one, on at least two occasions). If the stock is trading at, say 20, and I have a stop loss or stop limit at 15, will a 2-1 split that reduces the price to 10 automatically trigger a sale?

Thanks.
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.