The real art of Investing
The real art of investing is knowing when to sell an investment. Anyone with some money can buy any investment, like a publicly traded fund or a stock, however, successful investors know that a good profit from such an investment can only be made when the investment is sold.
As a matter a fact the first job of an investor is to protect his capital or principal invested, while the second one is to make some profit. So how does one go about doing a good job investing successfully? The answer is by adhering to a strict sell discipline.
We've all made expensive mistakes-either missing the full upside by selling too soon, or taking a huge loss by holding a falling stock too long। Everyone knows you should cut your losses early, and let your profits run. Well, the only way to consistently do both is to use a trailing stop which defines an exit strategy for all positions right from the start. This involves determining the percentage (say 5%, 10%, 20% or other, depending on one’s risk tolerance level) of the value of a position at any particular period that is exposed to the risk of loss from the start. So when an investment goes awry, the successful investor sells off at a pre-defined stop loss, and when value appreciates, the exit point is adjusted up. It is pertinent to note that it is all important to have the gumption to stick to an exit strategy to succeed in the art of investing. This takes the guesswork out of investing.
The real art of investing is knowing when to sell an investment. Anyone with some money can buy any investment, like a publicly traded fund or a stock, however, successful investors know that a good profit from such an investment can only be made when the investment is sold.
As a matter a fact the first job of an investor is to protect his capital or principal invested, while the second one is to make some profit. So how does one go about doing a good job investing successfully? The answer is by adhering to a strict sell discipline.
We've all made expensive mistakes-either missing the full upside by selling too soon, or taking a huge loss by holding a falling stock too long। Everyone knows you should cut your losses early, and let your profits run. Well, the only way to consistently do both is to use a trailing stop which defines an exit strategy for all positions right from the start. This involves determining the percentage (say 5%, 10%, 20% or other, depending on one’s risk tolerance level) of the value of a position at any particular period that is exposed to the risk of loss from the start. So when an investment goes awry, the successful investor sells off at a pre-defined stop loss, and when value appreciates, the exit point is adjusted up. It is pertinent to note that it is all important to have the gumption to stick to an exit strategy to succeed in the art of investing. This takes the guesswork out of investing.
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