Lose only 2 %

Kithsiri · 1 Lose only 2 % Tue Aug 30, 2011 4:50 pm

Kithsiri

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Does anyone calculate / adhere to the general rule of “ lose only 2 % “ of your investment in one dealing ?

mono · 2 Re: Lose only 2 % Tue Aug 30, 2011 6:01 pm

mono

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Kithsiri wrote:Does anyone calculate / adhere to the general rule of “ lose only 2 % “ of your investment in one dealing ?

for the most part I do. except when i invest 50ish percent of my portfolio in one share

Liber Abaci · 3 Re: Lose only 2 % Wed Aug 31, 2011 7:54 am

Liber Abaci

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Kithsiri wrote:Does anyone calculate / adhere to the general rule of “ lose only 2 % “ of your investment in one dealing ?

Interesting question !
First time I heard " 2 % " limit. (Have heard, 5% is O.K).
I presume this applies only to trading in momentum stocks. My experience is 5% loss limit is OK in Sri Lankan (CSE) context , mainly due to the high volatility of the momentum.
For example: HVA price increased by 112% (to 39.50 ) during 4 days upto 22-Aug. In subsequent 2 days, , it declined by 12% ( upto 34.90). Again it increased (upto 46.40) , 30% in next three days. (Examine LHCL, EAST ,COLO .. also)

Can we apply a loss limit to investment stocks ?
Think back to 2009 and 2010. During this period whatever the stock you invested what ever the time you entered, you could have ended up with a profit easily.
MPI peaked in late September 2010, highest Index value 7837 on 01 October, to be exact. If you have made investments in MPI type(or similar ) shares , during October / November and still carrying, , by this time your portfolio may show losses upto 30 %. ( there may be few gains ). Even the loss is 30% you may be holding , because you have done your valuations/forecasts and you are sure it has to reach to a particular price. But, at this point of time how do you apply 2 % limit ?

P/S ; By the way, ,what was the outcome of your social experiment on investing 500,000/-..... ?