A.I.M. Users Bulletin Board

[ls7550]

I remember reading about a stop loss method you use, something along the lines of using 12 separate equal positions (one per month) and using a 5% or 7% stop loss, and rolling those positions over if the stop was not called

That's a approach I used some years back, when 'cash' used to earn more (pre QE years). The concept being not to (ideally) lose any (nominal) value. If both cash and dividends are 5% then take on 5% max price decline risk (stop loss) and exit out to cash if hit, until recouped by combined dividends and cash interest. Otherwise reset/restart from the higher level (year end value assuming the stop loss wasn't hit).

So for example if invest in a 5% dividend yield stock and its price drops 5% below the purchase price a month after initially buying, then sit in cash (earning 5%) for another 11 months and you broadly have the same nominal amount as at the start, at which point start over again (5% share price loss recouped via dividends and cash interest). If the stop loss isn't hit and the share price rises 20% over the year, plus 5% of dividends, then you start afresh, but using 25% greater wealth (gains in effect locked in).

In a low dividend yield/interest rate world however its not really a viable choice/approach.