“When should I sell?”
And I completely understand why.
When you've got a share that's performing really well, the last thing you want to do is sell too early and then watch it continue climbing without you.
But there's an equally frustrating situation on the other side.
The share price starts falling, yet you hold on because you think:
“It's a good company. It'll recover.”
Maybe it will.
But maybe it won't.
And that's why I don't believe investing should be about trying to predict the future.
Instead, I believe you need a process for managing what happens when you're wrong.
Why protecting your capital matters
Let's look at two very different scenarios.
If you lose 5% of your capital, you need to make approximately 5.3% to get back to where you started.
But if you lose 50%, you need a 100% gain just to get back to break even.
The larger the loss, the harder the recovery becomes.
That's why one of the things I focus on when looking at shares is risk management.
And one of the tools I use is a stop loss.
So what is a stop loss?
Quite simply, it's a predetermined level at which you decide you're no longer prepared to hold the position.
It means you're making that decision before you're sitting there watching a share fall and wondering what to do.
It can help remove some of the emotion from investing.
And when I'm holding a share that's performing strongly, I also use a trailing stop.
That means I can my stop up as the share price rises, rather than me trying to guess exactly where the top will be.
Because here's the thing:
You don't need to sell at the top.
You need a system that allows you to participate in the upside while having a plan for protecting yourself if the trend changes.
I've made this easier for you
I've created a simple formula that I use to calculate where I would place my stop losses.
And for a short time, I'm happy to share it with you free of charge.
If you'd like a copy, simply reply to this email with the word STOP or get in touch with me and I'll send it through.
You can then have a look at the methodology for yourself and decide whether it could be useful for your own investing process.
And remember, the goal isn't to predict what the market will do tomorrow.
It's to make sure you have a plan for what you will do when it does something you weren't expecting.
Until next time,
Kara
Kara Northcott
Financial Educator & Facilitator
Helping New Zealanders gain the knowledge, clarity and confidence to make smarter financial decisions.
027 666 6784
📩 kara@financialconsultant.co.nz
🌐 kara-northcott-financial-consultant.kit.com
Unsubscribe · Preferences
