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stop losses long term investments

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WES
Super Contributor
I know this is an old topic, but would like the forum's idea on stop losses on long term investments, some people I have spoken to, say you should not even put stop losses on long term portfolio, in fact if the shares drop, you must keep on buying more. That is how confident you should be in your long term portfolio and if you cant be that confident you should not have the share. I mean we all are currently looking at our market at the moment and I think there is a general idea that our market has maybe run a little to hard, is it not wise to to put stop losses on the shares that have done fantastic in the short term, for instance in my portfolio, Steinhoff, it is a great share that I want to keep forever, but it might come back in the short term ?
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30 REPLIES 30
SimonPB
Valued Contributor
for long term investments I never sell on price .. my stop loss is on fundamentals .. take KIO, first twitch of bad news some 18 months back I bailed, SHP not worried about what price does short term, still holding
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manere_fortis
Frequent Contributor
I thought that conventional wisdom would be going short via cfd while you hold long share?
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SimonPB
Valued Contributor
hedging a mugs game I thinks ..
a video I did on stop loss for investors http://www.justonelap.com/webinarDetail.asp?intWebinarID=73
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Rams
Super Contributor
WES, if the trend is up, then buy when price comes down but still maintaining the uptrend,,,the low where you buying must still be higher than the previous low,,,Now , with SHF, why do you want a price stop loss, when the trend is up
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SimonPB
Valued Contributor
well no, I was buying at multi year lows in late 08 early 09 .. worked well enough
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manere_fortis
Frequent Contributor
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WES
Super Contributor
Thanks Simon and Rams. Just another question, in the case of Steinhoff, I am now say, 40 % up, would you put in a "profit" stop ?
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Rams
Super Contributor
if you trading , yes. If investing, then as Simon, said, based on fundamentals
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THRESHOLD
Super Contributor
Tax can tear a long term portfolio apart. However... if you can take a nice loss and buy back in - especially at a lower price... you get to use the tax effect to your benefit.
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reyden
Frequent Contributor
Long term stop loss: Retest the reason why you bought if not valid sell,company stops paying dividends - sell, earnings are down and prospects are bleak - sell, significant management changes - sell. Remember investing is not marriage but rather having a girlfriend
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indium
Contributor
Thats why its worth having a'well diversified' portfolio.
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kwagga
Super Contributor
Rather stressful way of trying to manage tax I would say. Much better way is to buy large into special dividend payouts, and then sell the underlying share on payday. You take the share price knock and end up paying only dividend tax. ABSA coming up in November.
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WES
Super Contributor
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prancing_horse
Super Contributor
Long term investing to me means just that, that's why the stocks I purchase for my long term portfolio's are the like of SOL,BTI,BIL,FSR,OML etc and then 5% in stocks that cost under R3 that satisfies the gambler me, so that even if they get totally obliterated, and some have, I still sleep well at night. Stop losses on long term portfolio.... not for me.
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THRESHOLD
Super Contributor
It is not something over which you have no say choice - a case of making lemonade out of a lemons.
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THRESHOLD
Super Contributor
oops... it is something over which you have no say. It is not something in which you have any choice...
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Major
Regular Contributor
I agree with Simon that you should sell on fundamentals, not just on price. However, having been through three substantial downturns, I do keep a stoploss on several of my long term holdings. To set this, I look at the long term trendline (multi year), and set first an alter 5% below this, and then a hard stoploss another 5% below this to prevent volatility or short term trends from kicking me out.
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LindaB
New Contributor
Thank goodness, I'm not the only one....
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Rams
Super Contributor
thresh, you been busy reading Benjamin Grahams masterpiece...nice. Both methods have their uses...the one(your post) more for longer term(investing) and the other(kwagga) is short term CFD method which we all thought will fall away with dividend tax...now my question is this, will the tax man note treat your dividend as income if you do it for the purpose of making an income?
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