Great contribution, thanks for that.
I think it's difficult to take profits. If you are currently invested in a company whose business model is going well and profits are increasing from year to year. The position size in your portfolio is getting bigger and bigger, so wouldn't it be a mistake to take profits now?
How many people are annoyed that they didn't stay on board with Nvidia because of risk management. Isn't it often the secret of success to show staying power, not to jump ship at the first big correction. And simply sticking with it.
What's your opinion?
I think it's difficult to take profits. If you are currently invested in a company whose business model is going well and profits are increasing from year to year. The position size in your portfolio is getting bigger and bigger, so wouldn't it be a mistake to take profits now?
How many people are annoyed that they didn't stay on board with Nvidia because of risk management. Isn't it often the secret of success to show staying power, not to jump ship at the first big correction. And simply sticking with it.
What's your opinion?
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@Tenbagger2024 Letting profits run and limiting losses does not have to be a contradiction in terms.
The key message of money management is to prevent individual positions from dragging the entire portfolio into the red.
If you are already well in profit with the position, everyone has to decide for themselves how much of this profit they are prepared to give up again in the worst case. I like to work with trailing SLs; the distance between the current price and the SL depends on the risk appetite and volatility.
If positions create an imbalance in the portfolio due to large profits, this is also a rebalancing issue. Ultimately, there is no black or white, everyone has to decide for themselves.
For me, it always helps to look at the chart and, of course, the associated risk/reward ratio.
But your statement about staying power is of course also true. The questions are then the opportunity costs or how long do I want to hold on to a negative position in a negative case. You only know afterwards. And "insurance" costs money, just like in real life 😅
The key message of money management is to prevent individual positions from dragging the entire portfolio into the red.
If you are already well in profit with the position, everyone has to decide for themselves how much of this profit they are prepared to give up again in the worst case. I like to work with trailing SLs; the distance between the current price and the SL depends on the risk appetite and volatility.
If positions create an imbalance in the portfolio due to large profits, this is also a rebalancing issue. Ultimately, there is no black or white, everyone has to decide for themselves.
For me, it always helps to look at the chart and, of course, the associated risk/reward ratio.
But your statement about staying power is of course also true. The questions are then the opportunity costs or how long do I want to hold on to a negative position in a negative case. You only know afterwards. And "insurance" costs money, just like in real life 😅
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@TomTurboInvest
Thank you for your detailed answer.
Even a Tim Schäfer, who has consistently bought and held, has made a considerable fortune without risk management.
My personal opinion on buy and hold is that it is very important to only invest in quality stocks with a moat.
But otherwise I think your approach to risk management is very good. And I didn't want to criticize it directly with my comment. I just wanted to make people think about it.
Because great contributions like yours always trigger a lot of thoughts in me.
But in the end, I think there are several ways to millions and not just one recipe.
Thank you for your detailed answer.
Even a Tim Schäfer, who has consistently bought and held, has made a considerable fortune without risk management.
My personal opinion on buy and hold is that it is very important to only invest in quality stocks with a moat.
But otherwise I think your approach to risk management is very good. And I didn't want to criticize it directly with my comment. I just wanted to make people think about it.
Because great contributions like yours always trigger a lot of thoughts in me.
But in the end, I think there are several ways to millions and not just one recipe.
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•@Tenbagger2024 Don't worry, I don't see this as criticism but as valid points that are interesting to discuss or to illuminate from different points of view.
For example, I'm not really a buy & hold investor, at least when it comes to individual shares. I believe more in the life cycle of a company than in "infinite" growth.
The investment horizon or the goal in general also play a role. As you write, there are many ways to make a million, but in the end everyone has to find the right path for themselves. And even the path must be adapted to changing conditions. Life doesn't go according to plan anyway.
For example, I'm not really a buy & hold investor, at least when it comes to individual shares. I believe more in the life cycle of a company than in "infinite" growth.
The investment horizon or the goal in general also play a role. As you write, there are many ways to make a million, but in the end everyone has to find the right path for themselves. And even the path must be adapted to changing conditions. Life doesn't go according to plan anyway.
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