Forum Archive Index - February 2000

[Nick Kearney <nk@xtra.co.nz>]

Osbert Sun wrote:
> 
>      Peter Robertson wrote:
> 
>      Was just thinking......all those people baling out of
>      shares, many of them cite that their "stop-loss" has kicked
>      in, so they sell, ...given the cyclical nature of the
>      sharemarket, and obviously we are presently near the bottom
>      (we hope) of a downward wave- we've seen it before... &
>      before too long things will be rising, well, aren't these
>      "stop-losses" a bit nonsensical. Personally, I would rather
>      hang on for the ride, than bale & get depressed. You might
>      say "Oh yeah, but what if you can't afford to lose the
>      money".. but surely if you can't afford to lose the money,
>      why be in the market. To my mind this "STOP-LOSS" mentality
>      could be what is ailing our market.
> 
> Good question Peter! "Stop-loss" is mainly practiced by market traders
> to: (i) protect themselves from heavy losses in stocks of extremely
> risky nature, and (ii) protect against "profit-erosion" in a falling
> market. Personally I don't use stop-losses unless I'm sure that the
> market will be falling further and that the same stocks could be
> picked up again at a much attractive price later. As far as I can see
> our market is in a "confused" stage at present and that it's very hard
> to tell which way the market is to go. So I'd rather sit tight and
> wait than exit my positions prematurely. However, I do select my
> stocks based on some fundamental factors thus I'm not too concerned if
> the market does fall further.
> 
> Regards,
> Osbert Sun

Yeah but ever heard of opportunity cost?
Makes sense to get out and put your hard earned $$$ into something that
is winning.  You can sit as long as you want in a share and watch the
ADV's of this world escape you.  Or you can pull out, save not only
future paper loss but in fact gain on a better share.  Don't you think?

Chers

NK

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