thanks for the reasoned reply:
1. If potential losses are going to affect your lifestyle, then you made the correct decision to reduce your risk.
2. I would suggest switching to the 2003 LEAPs. Maybe sell the 2002s (in increments) on any rallies, and buy 2003s on any dips. Although I think the Fed will manage a soft landing in 2001, I could easily be wrong. Capital spending on wireless infrastructure upgrades will take a big hit if we have a recession in 2001. Next-generation cell phones are not a necessity, like food or medical care. This switch (2003s for 2002s) would further reduce your risk.
3. I have mental stop loss (=sell) price as a stock is going up, not as it is going down. For instance, I'll decide a stock is worth, at the very most, a forward PE of 100, or a trailing P/S of 10. When the stock reaches that level, then I start selling in increments, because I think there is a lot of air underneath the stock price. This method didn't work very well in 10/99-3/00, because the quality techs I owned went way above my calculated "max-valuation" target. But I will still follow that rule, as it keeps me out of stocks that may suddenly lose half their value, and I think the 10/99-3/00 tech stock surge was a historical anomaly, an "outlying data point", that won't be repeated. This rule reduces my potential gains, but also reduces my risk.
4. If my entire portfolio lost 2/3 of its value, and stayed down for years, it would not change my lifestyle, and I would not have to go back to work. If I couldn't make that statement, then I would reduce my risk as much as necessary, till I could. The whole point of working my ass off for years and getting rich, was so I didn't have to worry about money any more. |
