Investors must always act to preserve to preserve a maximum of the profit that they’ve built up during the bull market rather than ride their investments back down through difficult bear market periods.
We understand that if an investor hesitates and allows his loss to increase by 20%, He/She will need a 25% gain just to break even. Wait longer until the stock is down by 25%, and he/she have to make 33% to get even. Wait still longer until the loss is 33%, and he/she have to make 50% to get back to the starting gate. The longer you wait, the more the math works against you, so don’t vacillate. Moving immediately to cut out possible bad decisions is the better idea. Also, an investment strategy without having proven selling rules is incomplete. Hence, we have developed the strict discipline to act and to always follow our selling rules.
Letting the losses run is the most serious mistake that almost all investors make.
You must accept the fact that mistakes in stock selection and timing are going to be made frequently, even by the most experienced of professional investors. I’d go so far as to say that if you aren’t willing to cut short and limit your losses, you probably shouldn’t buy stocks. Would you drive your car down the street without brakes? If you were a fighter pilot, would you go into battle without a parachute?
Exiting your stock at the right time is as important as selecting it. Cut your losses short and let your winner run is the golden rule to optimizing profits. And no, it isn't easier said than done. Anxieties of having to decide whether to hold or exit from a losing stock gives investors sleepless nights. And the result is usually to ‘hold on’ and ‘hope for a recovery’. To avoid this difficult decision, MILARS ensures strict use of the stop-loss tool which shields your portfolio’s gains while limiting losses.
Selling rules apply to exiting winners as well. It is very hard for investors to sell a stock that is moving up in price. The key is to keep the emotions aside and objectively analyse every situation to preserve the profits.
At MILARS, we have strict selling rules for both cutting losses and booking profits. We don’t budge from our rules at any point which helps us to stay in the game for a very long time.
The moral of the story is: never argue with the market. Your health and peace of mind are always more important than any stock.