free e-letter




Sign up for your investing e-letter – The Right Side – today 100% FREE and get instant access to download your free property report

You’ll discover:

  • Why anyone in the media touting the bottom of the property market is DEAD WRONG...
  • How far house prices are really likely to plummet from here on in...
  • Why the Bank of England’s frantic rate cuts WON’T make a scrap of difference
  • How to safeguard your assets no matter what happens to property prices
  • How to avoid the “negative equity trap”
  • The little-known “trigger point” that could mark the start of the real recovery
Plus you’ll instantly be eligible to receive The Right Side e-letter absolutely free.

Monday, Wednesday and Friday you’ll be privy to fresh, intelligent, hard-hitting opinion from our world-wide network of experienced, battle-hardened investors and analysts. Straight to your inbox. Everyday.

Sign up to The Right Side NOW and claim your free property report.
PROFIT HUNTER Profit Hunter

Profit Hunter tracks down exciting opportunities in the worlds' emerging markets.

Find out more about Profit Hunter »
RED HOT PENNY SHARES - PENNY SHARES INVESTMENT Red Hot Penny Shares

Former fund manager hunts down the superstars of tomorrow while they still sell for pennies!

Find out more about Red Hot Penny Shares - Penny Shares Investment »
ZURICH CLUB The Zurich Club

The Zurich Club gives you access to a seasoned panel of experts, whose tips and advice are intended to deliver top notch gains.

Find out more about Zurich Club »
Trading

Shield your stocks with this ruthless tactic…

Date 19/08/2008
Fleet Street Letter | By Theo Casey
Over the past 12 months the credit crunch has cruelly highlighted the flaws in every realm of the market. We must all learn from this and get back on track:
  • Banks must improve – They need to boost transparency and accountability
  • Hedge funds must improve – They need to reduce risks and costs
Investors as a whole need to be faster and more ruthless.

How?
FREE investment email
Sign up to recieve The Right Side here...
Logo1McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scamsPrivacy Policy
It’s a two step-process.

1. Speed – The market waits for no man

When the crunch first hit, many investors hemmed and hawed. Of course, hesitation can sometimes be a good thing. You don’t want to be making knee-jerk decisions.

However, one lesson othe crunch is that there are times when decisive action needs to be taken – and straight away! That’s why we’ve introduced a daily email service for Fleet Street Letter subscribers. That way we can stay in daily contact, and advise swift action should we deem it necessary.

2. Ruthlessness – Removing the emotion from decision making

As stated above, sometimes it’s good to wait-and-see. But sometimes it’s not. Trouble is, by the time you’ve found out it’s not, it’s too late.

What can be done about this?

Well, there’s no magic bullet. But at times like this, the trusty old stop loss can be an invaluable tool (invaluable because who knows the size of loss it could save you from in future).

Of course, in a volatile market, a stop loss can hinder you too. Set it too tight, and it’ll be triggered by virtually every stock in your portfolio – most of which will bounce back anyway. That’s what happens with a market that’s swining around erratically.

That’s why getting the level right is so vital. I’ve been doing some research into what is the best level (more on that below). I’ll be introducing stop losses in this week’s Fleet Street Letter, and saying what I believe is an appropriate place to set them.

What is a stop loss?

A stop loss is like an insurance policy.
FREE investment email
Sign up to recieve The Right Side here...
Logo2McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scamsPrivacy Policy
It is a price level for any investment at which our tips will, if reached, be automatically sold.

It prevents us from taking on big losers by cutting them off early. It’s a strategy that can turn our portfolio into a more ruthless, more efficient beast.

e.g:
  1. We tip Company ABC with a stop loss level.
  2. Company ABC reveals massive losses.
  3. Company ABC falls hard.
  4. The stop loss level, set by us, automatically sells the position and avoids any further loss
There is a vast body of research on stop-losses. One of my favourite accounts is from The Zurich Axioms. In this classic investment text, author Max Gunther explains stop-losses in the context of hope:

“When the ship starts to sink, don't pray. Jump.

“The inability to jump quickly off a sinking ship has probably cost more speculators more money than any other failing, and has undoubtedly led to the spilling of more gallons of tears than any other kind of financial misfortune.

“Getting stuck in a losing venture is the worst money pain there is. When the ship starts to sink, don't wait until it is half submerged. In all cases, the idea is to cut losses early.

“You take small losses to protect yourself from big ones. Some [investors] prepare for small losses in advance through use of stop-loss orders.”

“The main advantage is that such an order saves you from the agony of deciding when to sell.”

However, like any investment rule, this is not a solution to all of the market’s ills.

The impact of market volatility

We are currently experiencing a fiercely oscillating market. Many shares within the FTSE 100 index have fallen by more than 20% from recent highs, putting them into official bear market territory.

Shares in other indices hit the bear indicator even sooner. Introducing a cut-off point when the market is so volatile is tricky.

Get the stop loss level right and you can protect your wealth from obliteration.

No number of rules and criteria are a substitute for good decision making.

Nonetheless, as Max Gunther's tale demonstrates, the stocks that lose you money are only rarely the ones that make it back up for you.

We will be expanding on and explaining the rules for our stop loss policy in this week’s Fleet Street Letter.

To become a subscriber, visit our information page.

Best wishes,

Theo Casey
FREE investment email
Sign up to recieve The Right Side here...
Logo3McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scamsPrivacy Policy
P.S. If you enjoyed this article then we encourage you to sign up for The Fleet Street Letter. Get contrarian, cutting-edge analysis for sensible, long-term investments that secure you high growth and healthy dividends.
fleetstreetinvest

Your capital is at risk when you invest in shares – you can lose some or all of your money, so never risk more than you can afford to lose. The investment idea detailed in this promotion is call options where any profit depends on the potential price increase of an underlying security. The potential loss is predetermined and limited to the premium amount paid, and can be as much as 100% of the premium initially paid for the call. Shares recommended in the Fleet Street Letter may be small company shares. These can be relatively illiquid and hard to trade making them riskier than other investments. Some shares may be denominated in a currency other than sterling. The return from these may increase or decrease as a result of currency fluctuations. Past performance and forecasts are not a reliable indicator of future results. Always seek personal advice if you are unsure about the suitability of any investment. Profits from share dealing are a form of income and subject to taxation. Tax treatment depends on individual circumstances and may be subject to change in the future. Editors may have an interest in shares recommended. Full details of our complaints procedure are available on request and can be found on our website, http://www.fspinvest.co.uk/ Fleet Street Publications treats all clients as retail clients. The Fleet Street Letter is issued by Fleet Street Publications Ltd. Registered office 7th Floor, Sea Containers House, Upper Ground, London SE1 9JD. Customer services: 020 7633 3600. Registered in England and Wales No 1937374. VAT No GB629 7287 94. FSA No 115234. http://www.fsa.gov.uk/register/home.do Fleet Street Publications is authorised and regulated by the Financial Services Authority. © 2009 Fleet Street Publications Ltd.