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Last post 05-09-2008, 10:25 PM by neo-trading. 8 replies.
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  •  05-08-2008, 1:35 AM 28698

    How to build a long-term portfolio in this market?

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    I am finding it difficult to build a long-term portfolio in this market.  Very often, my positions hit the stop-loss value and triggers a sell, leaving me losing the position.  The point is that, I feel the stocks are swaying heavily in this market.

    Any suggestion on how you all overcome this situation is welcome.  I also wonder how to define a proper stop-loss value - as my numbers are usually a "feel good factor" value, just to minimize the losses.  Thanks in advance.

  •  05-08-2008, 4:16 AM 28702 in reply to 28698

    Re: How to build a long-term portfolio in this market?

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    Well, I don't have any technical advice to give you on the proper stop loss procedures, and I will preface by saying I am probably not the best person to be taking advice from, but I can offer some advice from some Warren Buffett on long term investing.  Buffett always said times like these, full of panic and uncertainty, are the best times to build long term positions, because you can get bargain prices (with astute research, of course).  He also was never one to sell very quick (if at all...). 

    If you really want to go long term, and you feel confident in your research and the future of the stocks you picked, maybe you could not set a stop-loss at all and let them work out any growing pains the can occur initially.  Of course, every investor situation is different.  I am sure plenty of people who can inundate you with ideas way better than mine.

  •  05-08-2008, 8:29 AM 28708 in reply to 28698

    Re: How to build a long-term portfolio in this market?

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    I agree with MJK58. I think Mr. Buffet also said that the best time to sell is never.

    If by long-term, you mean 5 years, 10 years, and beyond, your great companies will recover from the short term drops.

    I like to research by fundamentals and make a watch list of my best choices. Then I figure a target price to purchase, my margin of safety. The difficult part is having the patience to wait for a stock to drop to my target price. Some never do, like JNJ and USB. I have had limit orders on those two for a couple months now.

    If a stock drops right after I buy, I start looking to buy more. I look for around a 5% drop before buying more shares. I have not used any stop losses yet. I am a little concerned on KO, but not enough to sell it.

  •  05-08-2008, 8:45 AM 28710 in reply to 28698

    Re: How to build a long-term portfolio in this market?

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    I'm going to reiterate what others have said. The idea is to buy low, sell high. Your post reads like you are buying high and selling low.

    If a stock you own has dropped and you still believe in the company, buy more. That's the "buy low" part.

  •  05-09-2008, 2:06 AM 28785 in reply to 28710

    Re: How to build a long-term portfolio in this market?

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    Thanks everyone for your suggestion.  I think I am buying at high and selling at low, when I am supposed to be doing the other way.  I should probably start accumulating if it becomes low.

  •  05-09-2008, 3:11 AM 28786 in reply to 28785

    Re: How to build a long-term portfolio in this market?

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    I read an article from one of the guys at Motely Fool about how he likes to buy in thirds.  The first third is just a tiny chunk, like a minimum bet at the poker table.  If he likes what he sees on the finacials and the stock is holding steady or dips a bit, he buys some more.  If things really start looking like a lock, in goes the last third, the biggest chunk of cash.  I grew up with the old school "have to trade with a broker for $35 bucks a pop" philosophy, so having some low cost (or no cost) trades to play with allows a small timer like me to get a shot at putting in a little at first and then a lot later for that long haul investment.

  •  05-09-2008, 5:17 AM 28792 in reply to 28786

    Re: How to build a long-term portfolio in this market?

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    I think we all get irrational from time to time and buy things all at once, the biggest mistake new investor often make.

  •  05-09-2008, 6:32 AM 28795 in reply to 28698

    Re: How to build a long-term portfolio in this market?

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    neo-trading:
    I am finding it difficult to build a long-term portfolio in this market.  Very often, my positions hit the stop-loss value and triggers a sell, leaving me losing the position.  The point is that, I feel the stocks are swaying heavily in this market.

    Any suggestion on how you all overcome this situation is welcome.  I also wonder how to define a proper stop-loss value - as my numbers are usually a "feel good factor" value, just to minimize the losses.  Thanks in advance.


    Well, I can remember that stop-loss orders hit me when I first started trading too. I don't like them since they can trigger at the exact wrong time. I prefer to pick stocks that I truly like (not as easy now as it was at 11,900). If you truly want to cut your losses to a certain percentage, pick that percentage and when your stock sells, never look back. Another option if you are able to afford 100 shares of stock is to buy 1 put option contract out 6 to 9 months to provide some downside protection. However, if the put seller defaults, I don't know if it is secure (or not).

    I don't believe in stop losses and hardly ever use them; it is the risk of missing a quick reversal downtrend in the stock. I instead like to pick high quality stocks that I wish to hold for 6-18 months or more. Know as much about a company BEFORE making an investment. That's what I'd do and that's what I have been doing. I have had one or two stop losses in the last year so I really don't use them that often.
    Aqua

  •  05-09-2008, 10:25 PM 28837 in reply to 28795

    Re: How to build a long-term portfolio in this market?

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    aquaswim47:
    If you truly want to cut your losses to a certain percentage, pick that percentage and when your stock sells, never look back. Another option if you are able to afford 100 shares of stock is to buy 1 put option contract out 6 to 9 months to provide some downside protection. However, if the put seller defaults, I don't know if it is secure (or not).


    Options contract seem to be a good option to look at.  I will dig further to read on options.  Meanwhile, to write such put option contracts what level Options trading permission I would need?  Thanks.

    One of the reason I am trying to minimize the loss is that I also have a trading IRA a/c, where I dont want to lose any (as I cannot fund beyond the annual limit).
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