Investing in stocks is a “buying & selling” business. Basically, the companies that sell stock to the people expects us to buy and hold it as long as we can in order to maintain its value. if you are buying stocks without any selling, you are literally driving without a thought of braking. That is an unsafe position for your hard earned money. The most effective system for your money is a stop-loss order on your stocks.
What do i mean by stop-loss? It is an order you give your broker to sell your shares if a stock falls below a certain price. You can select a price for your stock based on percentage drop from your purchase price. Some brokers automatically move them as a stock moves up in price to lock-in profits for your potrfolio.
I know you believe that “The greatest investor Warren Buffett is a buy & hold investor!” No,sad to say he is not. He mainly buys whole companies or controlling interest in a company. He buys control so that if there are problems with the company, he can hire/fire/make changes. If there are problems with the company where you own shares, the only control you have to protect your principal is to sell it.
When a public company goes bankrupt, studies show 70% of the time the shareholders wont receive any money. Do you want your portfolio to be 0%? You know in yourself you dont want that, I know that stop-loss orders prevent it from happening.
With stop loss order, You can choose any percentage loss amount (5%-25%) , but you must have a stop-loss order in place to protect your money.
There a billions of stock market sayings. Here is one of them for those of you who are still doubting, “If the smart-money has sold and moved on, what type of money still own the stock?”