Know when to walk away

There are many Canadian investors who are saying “never again” afterriding the stock market down more than 40 per cent last year and intothis year and have vowed to avoid this sort of carnage next time.

There are many Canadian investors who are saying “never again” after riding the stock market down more than 40 per cent last year and into this year and have vowed to avoid this sort of carnage next time.

But how? An exit strategy for your investments would go a long way, a method that would allow you to get out of the market when your gains have reached your expectations or when the boom looks ready to turn to bust.

Investors sometimes hold on to stocks long after they should have sold them because of an emotional attachment. Other times, says Paul Thornton, investment adviser at Global Maxfin Capital, investors think they know more than they really do about what’s driving the market and their own particular stock.

Just to make sure you don’t try to push your luck, a popular way of ditching a stock is initiating a simple stop/loss order.

This means that your stock will automatically be sold once it reaches a certain point, up or down.

 
 
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