Recently, reader Vermcj had some interesting comments regarding sell stops and his experiences. In case you missed it, here’s what he said:
So, I stick with closing prices as the best way, for me, to determine when my sell stops has been hit, even though I don’t know of any computer program or brokerage firm+ that will calculate closing prices as daily sell stops.
And I believe your financial advisor or you, if you don’t have a financial advisor, have to look at your sell stops EVERY day. I believe if you, or if you don’t have a financial advisor like Ulli look at your sell stops every day, or if you do your own trading and don’t have enough time to evaluate your sell stops EVERY DAY and make changes in your sell stops, EVERY DAY, then you don’t have enough time to be managing your portfolio, because you aren’t giving the proper amount of time to properly manage the very basic aspects of it.
I believe that poor choices in stocks, ETFs, mutual funds, futures, and options are more forgiving than ignoring stop sells.
[My emphasis]
I agree. It’s important that you track your sell stops on a daily basis, especially if the market heads higher so that you can capture the new high price of your holdings. This new high price will form the basis for calculating the 7% trailing stop loss. On minor pullbacks, you can check price action, but there will be nothing else to do.
If you set up your tracking on a spreadsheet, this should take no more than a few minutes a day.
Look at the highlighted sentence above. I agree wholeheartedly that a poor selection of funds/ETFs is more forgiving than ignoring sell stops. The reason is obvious: A poorly selected fund may turn out to be a lagging performer, while not paying attention to sell stops can ruin years of investing.
That’s the lesson of 2008. Unfortunately, millions of investors had to learn this fact the hard way.
Comments 7
Assuming you have a reasonable number of funds, it is not that hard to keep track of the "high" below which we keep figure out our sell stops.
Just go to Yahoo, "Historical Prices". A quick scan shows you the high. Reasonable math calculation tells you if you are getting close to 7% or 10% as it maybe. 10 funds, hit enter 10 times. Not that hard really.
P.S. I don't know if I have ever made money following your blog. But I can tell you I very much appreciate you SAVING my shirt in the last bear market (dare I say it's over?)
This is the way I look at it this issue. I have more money in stocks than many people have invested in their own businesses. 15-30 minutes per day monitoring stop losses and looking at charts is a small cost of managing that capital.
best to all.
david
Agreed. Like what Ulli mentioned, just setup your spreadsheet with the appropriate columns and track the daily closing prices nightly. It shouldn't take more than 30 mins to update and make a decision on keep/sell/accumulate for your funds. For stocks portfolio, I do that daily and read up on related news daily and it takes less than 2 hours (but I am enjoying every minute of it).
Ulli, you also suggest selling a fund if it has dropped more than 7%from its most recent high. My question is, if a most recent high occured in May this year and the fund/stock is down more than 7% now since May, do you still consider it a sell? What if it was bought since May (maybe shouldn't have) thank you for your blog.
For a large portfolio (many securities &/or fund symbols) and for a small fee, there's tradestops.com
To Anonymous who commented "For a large portfolio (many securities & fund symbols) for a small fee, there's tradestops.com." From the tradestops.com website, as I read it from URL " https://www.tradestops.com/subscribe_now.aspit" the website writes that it will send up to 100 trailing stops per year. If you have "a large portfolio (many securities and fund symbols)," as you write that you do, do you really think that tradestops.com's 100 alerts per year is going to be enough for you; not me. Sometimes, I have a half dozen or more sell stops to check out, in one day. So, tradestops.com would last me maybe a week or so, plus there is an additional fee for options sell stops.
How long would it last you? If tradestops.com's 100 per year sellstops is not enough for you, since you have "a large portfolio (many securities and fund symbols)," what are you going to do, then?
To Anonymous who who commented "For a large portfolio (many securities & fund symbols) for a small fee, there's tradestops.com." how often do you make changes in your "…large portfolio (many securities & fund symbols?" If I you made very many changes in this large portfiolio with many securities and symbols, I would rather keep track of my sell stops on a simple spread sheet than have to log onto a computer to do it and make the changes, especially with the 100 alert imitations per year, which "Anonymous" pointed out are on tradestops.com's website.
I am an options trader, 100 sell stop alerts a year would be way too small of an amount for me. For an option, I set a sell stop on both the option and the underlying stock. I use a large number of these sell stops. Even if I were not an options trader, and did not use a large number of sell stops, I think it would be easier for me to continue to keep track of my sell stops on a spread sheet, rather than by logging onto a computer and making all the updates, EVERY DAY for my sell stops on a computer's website.
However, I am not a certified financial planner, or a stock broker, or any kind of licensed person to give financial advise, so what I am writing is just my personal viewpoint on how I probably would handle the sell stops on a portfolio such as yours, which you write is "a large portfolio (many securities & fund symbols).