Stop Loss

No matter what investment you have, be sure to have a stop loss.  Set this stop loss as soon as you enter the investment. You can move your stop loss upward as your investment gains value,  but never move your stop downward.    This stop loss will prevent you from getting into emotional investing.

For example, let’s say that you buy Qualcom (QCOM) stock at $48 a share.   Immediately you would set your stop for a maximum loss of 15% at $40.80.     You would let your broker know that they should sell the stock if  the daily market closing price is  below $40.80. 

A stop loss allows you to cut your losses and let your winners run.

Not to bring up a sore subject, but….    if you had followed this simple step, how much less of a loss would you have incurred last September 2008?    Make a stop loss the #2 rule in all of your investing.

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