March 15th, 2011

moneybear

A Somewhat Expensive Lesson

After the financial meltdown a few years ago, I decided to manage my portfolio a little better. Once the market started to recover, I started using trailing stops to protect my gains. My pain threshold is 10%. I am willing to give up 10% of my gains or I am willing to take a 10% loss, but no more. It's a lesson in discipline that is necessary when investing. When do you say "enough is enough" both to the good and to the bad. For years I watched stocks go lower and lower with the mantra "It'll come back! It'll come back!" and then it never does. Meanwhile that money is tied up and not working for you.

So this morning the market tanked. I received several notices that sell triggers had been met. I knew things were bad, but not THAT bad. I checked one stock that I had just bought last week and saw that the price had plunged at the open of the market but then slowly recovered over the next few hours. That brief plunge was enough for the sell order to kick in. I may have to change my strategy to only initiate a "sell" if the stock closes at a certain price. The only downside to that is if the price is in a constant fall, it might be too late by the end of the day to initiate a "sell." That happened to me a few weeks ago. By the time the "sell" kicked in, the price had fallen to a point where there were no buyers at my price. I'll get this whole Market thing figured out somehow! I'll be happy as long as the end balance is in nice black numbers instead of red.