With all the talk about an imminent market crash and increasing volatility, I’m curious—do you have a strategy to protect your investments?
One idea I’ve considered is setting stop-loss orders, like selling if the market drops 10%. But I know the market can drop 10%, bounce back quickly, and trigger a bunch of sell orders unnecessarily.
Do you have strategies to shield yourself from massive losses? What’s your take on balancing long-term investing with these short-term protections?
Long-term investing is about holding through ups and downs. Historically, the market goes up in the long run.
Jem said:
Long-term investing is about holding through ups and downs. Historically, the market goes up in the long run.
That’s true for now, but what if the U.S. market ends up like Japan or China, where recovery took decades or didn’t happen at all?
@Uma
If you’re young and still earning, ‘lost decades’ aren’t really a problem. You keep investing during the flat years, and those investments pay off big later on.
If you’re investing for retirement that’s decades away, selling after a 10% drop is the wrong move.
Kai said:
If you’re investing for retirement that’s decades away, selling after a 10% drop is the wrong move.
I just threw out 10% as an example. I’m asking if there’s a strategy along these lines that people use.
@Uma
Even with any percentage, if your timeline is decades, selling during drops is counterproductive. Use those dips as a chance to buy more.
I don’t sell unless I need the money for something specific, like a big purchase or an emergency.
Mai said:
I don’t sell unless I need the money for something specific, like a big purchase or an emergency.
So you only sell when you absolutely need to, and otherwise stay fully invested? That’s what I’ve been doing too—thanks for the insight.
Are you talking about buy orders instead? Why would I hold stocks just to sell them when they drop in price?
Jordan said:
Are you talking about buy orders instead? Why would I hold stocks just to sell them when they drop in price?
Do you keep cash on hand to take advantage of dips? If so, what percentage of your portfolio do you hold in cash during a bull market?
Sometimes I feel like selling everything and waiting in cash until the crash hits. But then again, who knows when it’s coming? Maybe I’ll just move 30% to cash for now.
Long-term investing and stop-loss orders don’t mix well. I only use stop-losses on a small speculative part of my portfolio, like crypto or volatile stocks, and especially when I know I’ll be offline for a while.
I don’t use stop-losses for my long-term index funds, but I might consider them for speculative growth stocks in unique situations. For example, with heavily shorted stocks like ACHR or JOBY, I avoid setting stop-losses because of the risk of stop-loss raids by institutional investors.
Setting stop-loss orders for long-term investments is generally a bad idea. Decades of data show market timing doesn’t work. Why do you think you can outsmart the market?
Instead of selling, I set buy orders for when the market drops 5%, 10%, 15%, or 20%.
Too many people let emotions guide their investing decisions. Stop-losses are one example. The market rewards long-term patience, not short-term reactions.
Ren said:
Too many people let emotions guide their investing decisions. Stop-losses are one example. The market rewards long-term patience, not short-term reactions.
That’s fair. But some people have less experience or knowledge, so they ask questions to figure things out.
@Uma
It’s not about experience—it’s about mindset. The market has always rewarded those who hold on for the long term. Short-term dips just look more dramatic now because everyone is so reactive.
I think selling to hold cash and buy back during a dip can work if you’re disciplined. But if you’re prone to FOMO, you might regret selling too early and missing out on gains. The market will drop eventually, but timing it perfectly is tough.