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Speaking of McNeil's advice to sell if a stock drops 8%, that reminds of Harry Browne's advice. His financial letter is defunct now since he has become involved in Libertarian politics and will probably run for president again in 2000. But, here's what he did: Whenever he recommended an investment, he would tell you to place a mental stop, or an actual stop, some distance below the recommended price, always less than 10% below. His concept was to look for "value" and "support". He never let you suffer a big loss. The minute it looked like an investment was heading south, he got you out. He would often say, that "we can still watch it, think about it, and perhaps buy it again, but let's not risk a big loss." And, if the investment rose, he would use trailing stop losses to preserve the bulk of the profit no matter what happened, even if he earnestly thought there was further to go on the upside. He wasn't arrogant like Dessauer. He would often say, "Let's not assume we can pick the top; let's just let the market tell us when to sell." He didn't presume he knew what was going to happen next. He always stressed that the future was unknown, and nobody could say for sure what was going to happen next, both in the short-term and the long-term. He had his hunches, but he spoke of multiple probabilities, and he didn't assume he was a seer. He often said that there was a chance this could happen or that could happen, that either one was possible, and you had to be prepared for both. Even if he thought an investment had further to go on the upside, he would always protect the gain with an actual or mental stop loss, and he was extremely disciplined about it. He never second-guessed it. But this was a lot of work for him because he sent faxes out to all of his subscribers whenever a stop loss got triggered. But more than anything else, he cared about his subscribers, and he was painstaking about protecting them from losses, both "paper" and "real". He felt that was his greatest responsibility was to make sure that none of his subscribers lost money. Unfortunately, he didn't recommend individual stocks, but rather mutual funds, and I had decided that I wanted to buy individual companies, and that's what led me to Dessauer. |
