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Why ExitPoint

Always be sure to limit your losses and protect your gains. That's the key to successful investing, right? Sounds easy enough, so what's the problem? Well, there is no problem if you have carefully thought through your investment philosophy, defined your goals, established rules and then consistently followed them. Hey, maybe this stuff isn't so easy after all. Let's consider a few questions and see what this really involves.

  • What were your goals for this investment? Is it part of your retirement strategy? Are you looking to make a quick killing? Can you afford to lose your money on this investment? If not, how much risk are you prepared to accept?
  • Have you set any objectives for earning a return on your investment? We all know you can stick your money in a bank and be rock solid certain that when you withdraw it, you will get your principal back plus a return on that principal, albeit a small one. That being the case, what do you expect to earn when you can't be sure whether you'll get that principal back?
  • Do you monitor your investment regularly? Do you know how it is performing? If you have a broker who monitors your investments, do you know how he or she is performing?
  • When you buy a stock that goes down in price, do you feel that you must hold onto that stock until its price rises back up to what you paid for it?
  • After you sell a stock, even where you have made a tidy profit, does it upset you to see that stock rise further in price?

Emotion and Investing - Mixing Oil and Water

We're all human. That's part of the problem. We react with emotion . . .we invest with emotion. We buy and sell with emotion. We hold onto that last hot tip, hoping upon hope, as our investment plunges in value - 20% - 30% - 40%, that it will turn around and go into the black. Perhaps we even buy more on the way down to "dollar cost average" our investment. Or we despair as that nice tidy 30% gain we had when we last checked the paper is now actually worth less than the money we invested.

Technical analysts don't mind these human frailties one little bit. In fact, they make their living on it. And so do countless investors who make their decisions to buy and sell based on their ability to predict human behavior in the stock market. Why shouldn't they? They've got plenty of history to back them up.

Technical analysts are not concerned with how a company performs, what its earning potential is, how experienced is its management, what competition it faces, or what new products are coming off its assembly line -- in short, technical analysts do not attempt to measure a company's intrinsic value. What does concern them is the psychology of the market and investor behavior. They look at past price movement and trading volume of stocks and markets as an indicator of future performance. They know, for example, that when a large number of investors buy a stock at $50 per share and the stock has declined in price, there is likely to be a level of resistance to breaking through that $50 barrier. Why? Because history tells them that many of these investors are holding onto this stock hoping it will return to the level at which they bought in. Should the stock hit that price, there's going to be a lot of sellers looking to get out. Imagine that as an investment goal, merely hoping to get your money back! Not very ambitious . . . and certainly not a very profitable way to invest.

Practical Obstacles

Beyond the emotional factors that can cloud sound judgment, there are also some practical obstacles once a stock has declined in price. Consider the following example. You purchase a stock at $50 per share. Should that stock fall to $40 you will have lost 20% of your investment, another 20% should it fall further to $30, and half of your investment should it fall to $25 per share.

   Price Per Share  % Gain/Loss
$50.00 0%
$40.00 -20%
$30.00 -40%
$25.00 -50%

Now that our stock is worth only $25, let's examine the percentage moves it has to make to recover these losses.

   Price Per Share   % Gain/Loss
$25.00 0%
$30.00 20%
$40.00 60%
$50.00 100%

 

To recover a mere $5 of the loss from $25 to $30 per share, the stock must rise in value by 20%. (Remember it took a $10 decline from the original $50 purchase price to cause that 20% loss.) For the stock to recover to $40, it must rise in value 60%. To reach the $50 break-even point, we must now make 100% on our investment. That's right, a 50% loss on an investment requires a 100% gain thereafter just to break even. As the example illustrates, there's a reason why they say it's a whole lot easier to slide down a hill than it is to climb back up.

Even assuming emotion doesn't enter into the investment equation, there's another practical obstacle to successful portfolio management and wealth accumulation. Good intentions are not enough. You must also set aside the time to stay on top of your investments. This sounds easy enough, particularly with all the information available on the Internet. In reality, the need to stay informed is perhaps the number one reason why many of us are afraid to invest. After a long day at the office or watching the kids, the head hurts . . . the brain is tired. Even if you use a broker to oversee your investments, how often do you take the time to oversee your broker's performance? What we all need is a quick and easy way to get the information we want, when we want it and, most importantly, with minimal effort required.

Finding the Missing Pieces to the Puzzle

Armed with the knowledge that investment decisions based on emotion rather than reason are a recipe for failure, and that quick and easy access to key information is an ingredient for success, what tools do we need to ensure a more satisfying outcome? The most experienced investors will tell you that the key to wealth-building and wealth preservation is to have a specific strategy for investing in stocks and to apply that strategy in a consistent and disciplined manner. Helping you do so is the bedrock principal behind ExitPoint®. What do you need to know? Let's start with some important principles:

  1. Understand that even great stocks suffer declines and true stinkers periodically prosper. Besides death and taxes, add the following additional certainty to the list. You will never always buy in at the bottom and sell at the top.
  2. Be prepared to decide what is an acceptable profit to make and what is an acceptable amount to lose. You can always increase your profit expectations. You should never increase your loss expectations.
  3. Don't be wedded to a stock. You're in this to make money.
  4. Figure out your objectives. It's pretty hard to reach your destination if you don't know where you're going.
  5. Stay informed. With all the tools available out there, there's no reason to be in the dark about whether or not your money is working for you?

OK, I'm ready. Now what do I do?

There are countless articles on the Internet and elsewhere about the importance of cutting your investment losses. There are probably almost as many that talk about the importance of preserving gains. That's great, except we haven't seen a single investment site that allows you to quickly and easily put this wonderful concept into effect. That's why we invented ExitPoint®!

There are numerous ways to analyze stock purchase decisions on the Internet, not to mention numerous brokers and investors out there just waiting to give you the latest "hot tip." ExitPoint® is not a stock selection program. It is a unique and innovative portfolio management application that allows you to easily track your investments and set exit strategies for each security in your portfolio customized to your own tolerance for risk. ExitPoint® won't recommend what to buy, but it will assist you by ensuring that you won't ride stocks down and give back your gains because of inattention or emotion. Remember that even the best stocks can be bought at the wrong time . . . and therefore the wrong price.

Can you do all of this on your own? Perhaps . . . that is if you can remember the purchase price for each stock in your portfolio, the performance of each stock, the return (or loss) on your investment and the exit strategy you plan to follow at various price points for each stock, customized to your own risk tolerance, to avoid letting your stocks suffer ruinous losses or give back substantial or all their gains. Happily, there's an easier, more efficient and more reliable way - with ExitPoint®. In just a few mouse clicks, or by Email delivered right to your in-box, you can get the information you need to maximize your wealth building opportunities by cutting your losses and preserving your hard-earned gains.

What, another subscription?

If you had a nickel for every subscription offer you received, you probably wouldn't need to invest in the stock market at all. There are that many offers . . . and that would be a lot of nickels. On the other hand, every so often you'll run across that hidden gem amidst an abundance of mediocrity. We may have been hard to find but a quick trial run of ExitPoint® will convince you there's nothing else like it on the world wide web. If you're serious about investing and are looking for a powerful investing tool that you can master in minutes, you need look no further. But don't take our word for it.

Experience the value of ExitPoint® and decide for yourself whether it can help you better manage your investments - or keep track of the performance of those who do. Take advantage of our free no-obligation 30-day trial. You'll have access to many one-of-a-kind features you won't find anywhere else, including our proprietary "Sell Alert" strategies for both long and short positions, powerful set-and-forget email alerts, featuring dozens of alert criteria, hundreds of useful bits of information about every position in your portfolio (with useful links to many more), and powerful database searching capabilities that let you zero in on the information most important to achieve investing success. If you're a serious options trader, you won't find a more options powerful portfolio manager. Annual subscriptions start at around $130 around $11 per month), a fraction of what you can save by limiting your losses . . . and what you can make by protecting your gains!

Give us a try. Whether you're just starting out, an experienced investor lacking only time on your hands, or an investment professional in need of a centrailized client portfolio manager and alert system, with ExitPoint®, in just minutes a day, you can ensure that you will limit your losses and protect your hard-earned gains.

Wishing you many “happy returns.”