How To Avoid What Most Investors Fail At Consistently

Evaluating market performance charts

Fear. Anxiety. Excitement. Relief. Then fear...

This gambit of emotions is likely what you've gone through the last few weeks if you've been keeping close tabs on your portfolio. Concerns over the mid-term elections, the trade war with China, ideas that the Federal Reserve will keep increasing interest rates, and slower growth prospects this earnings season... these have all shaken investor confidence.

---Recommended Link---
New Retirement Solution: 'Executive Dividends'Issued by some of the biggest corporations in America but unreported by the press, these "Executive Dividends" can be worth a fortune--if you know where to look... See how to cash in HERE, starting at $3,080 per month .

The market's volatility has definitely had an effect on our portfolio here at Maximum Profit -- the system has given us a secondary sell signal (a trailing 15% stop-loss) on a handful of positions.

On October 8, I sent Maximum Profit subscribers an alert letting them know that two of our stocks had hit their trailing stop-losses. The first was cybersecurity firm Okta, Inc. (Nasdaq: OKTA ), which we closed out of with a 21% return. The other stock was Atlassian Corporation (Nasdaq: TEAM ), which we cut short for a small 6% loss (the stock has continued to drift lower since then).

Then on October 10, U.S. stocks saw their largest drop since February. The downdraft caused us to hit our trailing stops in Square (NYSE: SQ ) and Fortinet (Nasdaq: FTNT ).

Including these four sells, we were closed out of nine holdings in the last three weeks.

We booked profits in Etsy (Nasdaq: ETSY ) and Apptio (Nasdaq: APTI ) after they hit their trailing stop losses:

It's no fun to watch gains evaporate nearly overnight -- telling ourselves in vain that we should have sold at the top -- but the fact is you simply can't see what's coming. It's better to get stopped out and book our gains (or cut our losses short) than it is to hold on and "hope" for it to get back to its old high because sometimes it never does.

Why I'm Glad We Had To Sell

That's the beauty of what we do at Maximum Profit -- and it's the one thing that individual investors fail at most consistently .

Take, for instance, former Maximum Profit holding Seadrill (NYSE: SDRL ). Investors who got out of the stock when the system told us to were able to keep all their money (and even book a small profit). But those who invested with the "hope" mindset are still waiting... and have likely given up all hope as their investment is pretty much worthless:

Here's another more recent example with semiconductor firm Ultra Clean Holdings (Nasdaq: ).

Here's another more recent example with semiconductor firm Ultra Clean Holdings (Nasdaq: UCTT ).

Think about that for a second. With the Maximum Profit system, a $10,000 investment in UCTT turned into $15,224 in only 185 days. That's a 103% annualized return.

Yet, those investors who didn't follow the system's rules -- or worse yet, didn't have any sort of rules in place at all -- got absolutely crushed.

Imagine the mindset you would have had with this stock if it weren't for any sort of concrete rules. Be honest. When the stock started to show some weakness, it would have been very easy to think to yourself "It's OK, I'll hold on until shares are trading for north of $30 again." If that would have been you, then you would have not only seen all of your gains evaporate, but a $10,000 investment would have shrunk to a measly $6,839.

---Recommended Link---
This Device Tells Death To WaitYou know all those promises about how one day scientists will eradicate disease... and how we'll all live to be 120 and play golf every day? It looks like this is actually going to happen after all, thanks to a disease-killing tool that's faster, cheaper and far more accurate than anything tried before. Come see why I think this is such a big deal .

The Takeaway

Look, I know I probably sound like a broken record, but it's so imperative that you follow a clearly defined set of rules for buying and (especially) selling stocks. Don't wait until you already own a stock -- by that point, your emotions could easily cloud your judgement.

It's better to book gains or cut losses short than end up with a portfolio of hope -- that is, a portfolio of "I hope to get back to even someday."

You can always get back into a stock once the dust settles. Or better yet, move on to a better opportunity.

P.S. Despite the uneasiness in the market, my system has still identified a handful of stocks that are poised to rally. In fact, we just identified five new buys to add to the portfolio. To learn how to get the names of these picks -- as well as learn more about how Maximum Profit works, go here .

Related Articles

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

© Copyright 2001-2016 StreetAuthority, LLC. All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos

    Street Authority

    Founded in 2001 by industry veterans, StreetAuthority is a financial research and publishing division of Investing Daily. Our mission is to help individual investors earn above-average profits by providing a source of independent, unbiased — and most of all, profitable — investing ideas. Unlike traditional publishers, StreetAuthority doesn’t simply regurgitate the latest stock market news. Instead, we provide in-depth research, plus specific investment ideas and immediate action to take based on the latest market events.

    Learn More