Don't Lose Money

These three words sum up the advice of the world’s most successful investors. There are several tools in our tool box towards this end. For some, the tool of choice is an account like an indexed annuity or indexed cash value life insurance. For others, it includes some money placed in alternative investments that are not correlated to the stock market. For money that is exposed to the risk of the stock or bond markets, we believe it is prudent to use a stop loss tool to protect your principal and lock in your profits. Don’t ever allow a small loss to turn into a large loss. Protect your seed corn.

For market based strategies, we adhere to a time-tested trailing stop strategy. That means on every one of our market based strategies, we know in advance, exactly where we’ll get out. This takes the guesswork and emotion out of investing. This also protects both profits and your principal. It prevents a small loss from turning into a large loss. It also guides your exit strategy on when to take profits. Using a trailing stop strategy allows you to let your winners run and cut your losers short. Everyone knows this, but few investors actually do it. During the bull market of the 1990s, many investors watched as their stock portfolios grew bigger and bigger. There was only one problem. They never took any profits. They had no sell discipline whatsoever. And, they watched many of those profits evaporate entirely. Sometimes those significant gains then even turned into losses. Other investors bought stocks early in the bear market with high expectations. And they were crushed to see those shares drop to levels they never would have imagined. In both cases, the fault was the same: They failed to have a sell discipline. Investors without one are simply flying by the seat of their pants. Flying by the seat of your pants rarely ends with long term prosperity.

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