It has been, surprisingly to me anyway, a good couple months on the markets. I'm happily up lately, thanks in part to my friends Mercado Libre (MELI) and McCormick (MKC).
The places I go for stock ideas and wisdom generally hold against "stop loss" orders -- because a sudden and basically irrelevant swing in the markets can cause the order to execute, and you wind up selling low and buying high again, owing taxes, having lost on the recovery, etc.
That makes some sense, and I think it would indeed be foolish to be placing stop loss orders daily or weekly (maybe monthly, though less sure about that), trying to preserve every inch you've gained.
But here's a counter-point: Why not place stop loss orders on investments that have done well, and which would theoretically preserve not one week of gains, and not ten years of gains -- but perhaps six months of gains?
Yes - if the trigger is some freak crash that quickly recovers, you'd be selling lower and perhaps re-buying higher. And yes, you'd owe taxes.
So what? Money is money. You'll be wealthier than you were, and if you believe in that stock for the long-term, making some money and then paying a little more for it again doesn't strike me as the end of the world.
Say you're up 20% in 6 months -- very good! -- and you set a stop loss at 15% - and it triggers. Well, you still made 15% in six months, handily beating the long-term market average. Great!
Ah, but now you owe *taxes.* Again, so what? You owe taxes because you ... made money - which is, again, great!
I find it funny that investors often seem to see paying taxes on gains as anathema -- while I suspect few people would thumb their nose at a nice raise at their job, for which they would of course ... pay taxes.
Seems to me stop loss orders are not incompatible with an otherwise conservative, long-term investing mindset. Worst case scenario is you made some money on a good investment - a little less than you hoped, a little earlier than you planned. And maybe in exchange you slept easier at night knowing that.
Submitted July 18, 2018 at 10:29PM by pisivus https://ift.tt/2O1wBnu
