10% rule !!!
My dad did business his entire life and did a pretty good job at it. He always had 10% rule to his business and I could never really understand it till now. But its kinda getting clear to me now when I am getting my hands dirty.
His 10% rule goes like this. He will take as much risk as necessary to reap 10% gains from his investment. Anything more than that he wiill be happy to pocket as long as it comes w/o any risk. I think this is the key. Not getting greedy in turn increasing your risk.
He repeats this year after year after year. And this can double your money in approx 7 years (going by 72/rate of return rule). You might say 10% is no good and you are doing 20% or even 30%. But to put this in perspective here is a fact. "Stock market has 7% return in last 100 years including dividend". I bet that 10% every year sounds good now.
Infosys technologies (NASDAQ:INFY) fell 11% when it reported its earnings. Good 31% increase in profits but it could not meet the expectation of beating expectations (pun intended). I am still in profit as I bought it at much lower price but I did not put a stop loss order hence losing my gains. NOONE HAS GONE BANKRUPT TAKING PROFITS but in stock market: gains are not profit unless you ring the register. Its all on paper. So here is a new rule for me. I am going to put stop loss orders at 10% to limit my losses and to ring that register if ever sky is falling when I am not looking :)
LIMIT YOUR LOSSES AND CASHIN YOUR PROFITS.
1. With every purchase, put a stop loss order at 10% below the cost price. Or below 200 days moving average. Whichever is a smaller percentage.
2. Keep moving this stop loss trailing order up from here and never move it down. This one is a little tough to follow but I will try to stick with it.
3. Once unrealized gains > 10%, move your sell order at this point and keep raising it with increments of 5%.
Wish me luck :)
His 10% rule goes like this. He will take as much risk as necessary to reap 10% gains from his investment. Anything more than that he wiill be happy to pocket as long as it comes w/o any risk. I think this is the key. Not getting greedy in turn increasing your risk.
He repeats this year after year after year. And this can double your money in approx 7 years (going by 72/rate of return rule). You might say 10% is no good and you are doing 20% or even 30%. But to put this in perspective here is a fact. "Stock market has 7% return in last 100 years including dividend". I bet that 10% every year sounds good now.
Infosys technologies (NASDAQ:INFY) fell 11% when it reported its earnings. Good 31% increase in profits but it could not meet the expectation of beating expectations (pun intended). I am still in profit as I bought it at much lower price but I did not put a stop loss order hence losing my gains. NOONE HAS GONE BANKRUPT TAKING PROFITS but in stock market: gains are not profit unless you ring the register. Its all on paper. So here is a new rule for me. I am going to put stop loss orders at 10% to limit my losses and to ring that register if ever sky is falling when I am not looking :)
LIMIT YOUR LOSSES AND CASHIN YOUR PROFITS.
1. With every purchase, put a stop loss order at 10% below the cost price. Or below 200 days moving average. Whichever is a smaller percentage.
2. Keep moving this stop loss trailing order up from here and never move it down. This one is a little tough to follow but I will try to stick with it.
3. Once unrealized gains > 10%, move your sell order at this point and keep raising it with increments of 5%.
Wish me luck :)
posted by Vivek Garg at 11:15 AM
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