Don't Lose All Your Money
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The article "Don't Lose All Your Money" is about mutual funds, it was created by Tom Donaldson.
That sounds like good advice doesn't it? Don't lose all your money.After all what is an investor without funds in the brokerage account? Hint: BROKE! On the subject of investing, this means getting out of a trade when it goes against you. Don't lose all your money. This is the MOST important thnig any investor can do. Cut your losses before you're brkoe. It's not hard to do, but some investros find it hard to implement. Don't becmoe so attached to your purchasing decision that you ignore this advice.Set a stop loss figure on every stock or investment you have.
Dceide on how much you're willing to lose before you buy. All brokerage accounts have a way to set a stop loss.
You can do this right in your account so that it's triggered automatically.Use an atcual price or a percentage. Take the time to learn how to set up a stop loss order or trailing stop in your particular brokerage account. Or if you have the time and stick-with-it-ness to monitor your accuont on a regular basis (like all the time), keep track of where prices are mentally.Here is an interesting chart that shows how much an investment has to go BACK up for you to get all your money out.Take a look at this...If the price per share goes down 10% - the stock has to go back up 11% for you to get back to even. Not conivnced yet?...Down 20% - the stock has to go back up 25%.
...Down 25% - the stock has to go back up 33%.
...Down 50% - the stock has to go back up 100%.
...Down 75% - the stock has to go back up 300%.
...Down 90% - the stock has to go back up 900%.Looking at this would recommend you're gambling if you set a stop loss at more than 25%.Bottom line is, don't fight the trend and the hard reality of numbers - Use a stop loss to get out of any investment that goes bad. Don't lose all your money!Tom Donaldson shares his investing experiences on his Panglossian Investor Blog and invites you to join the Panglossian Investor discussion group.
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Don't Lose All Your Money
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