Chapter 19

Minimizing Losses and Maximizing Gains


Bullet Limiting losses in active trading and long-term investments

Bullet Making the most of your returns by noting peaks and valleys

Depending on whether you’re a short-term trader or long-term investor, you can manage your portfolio either actively or passively. If you’re a long-term investor (see Chapter 18), you may find yourself managing your portfolio passively by buying and holding a well-diversified portfolio over a set amount of time. If you’re a short-term trader, you can use the tools I present in Chapter 17 to manage and obtain your desired objectives in a more active way.

I’m a big fan of long-term investing, but that doesn’t mean I’m against active portfolio management. In fact, I’ve seen over and over again that you can get better returns, whether they’re long term or short term, by actively managing your portfolio. Now, by active, I don’t mean sticking to your screen all the time and covertly checking your investment apps throughout the day during conversations and meetings. This chapter explains some management strategies that can help you find a sweet balance to do it all and still maintain an outside life.

Keeping the Losses Down

A phenomenon called loss aversion occurs in behavioral finance when investors ...

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