Knowing EXACTLY When to Sell Your Stocks

Knowing EXACTLY When to Sell Your Stocks

Buying stocks is fun. There are so many sources you can go to for great ideas. Stock screeners, news reports, and, es- pecially, the great analysts here at Stansberry. As investors, we’re drawn to stocks that have exciting stories. We expend vast amounts of time, energy, and effort on figuring out the best stocks to buy.

But selling? Selling our stocks is hard. Really hard. How can you know when the right time is to get out of a position? Unfortunately, for most people, it boils down to guesswork. For instance, have you ever... ■ ■ Put too much money into a stock because you were excited about it? ■ ■ Tried to salvage a losing investment by doubling down on a stock? ■ ■ Told yourself that you’ll wait for the stock to get back to even before selling? ■ ■ Or ended up riding what should have been a small loss and turn it into a big loss that damaged your portfolio, or even wiped you out? Sound familiar? It should, it’s happened to everyone who wanted to become a successful investor. It happened to me when I began investing during the tail-end of the dotcom bubble. It happens to seasoned investors, too. Take Bill Ackman, for instance. To call Ackman a “seasoned” investor is an understatement, though. The man is a legend. Yet even Mr. Ackman isn’t immune from the mistakes we all make. It’s a good bet you know the story of Ackman’s

epic fail with Valeant Pharmaceuticals. Yet this chart still shocks me every time I see it.

Ackman made almost every mistake in the book. Buy too much of a stock you’re excited about? Check. Desperately try to salvage the position by buying more? Check. Refusing to cut losses and riding the stock all the way to the bottom? Check. Now, it may sound a bit arrogant, but I have no doubt that if Bill Ackman had TradeStops to help guide his decisions, he could have eliminated a lot of heartache... and had a nice profit to show for it. I created TradeStops to help investors avoid just that kind of nightmare scenario.

2 | Knowing EXACTLY When to Sell Your Stocks

After years of intensive research, I’ve developed a set of tools that any investor can use to pinpoint exactly the right time to sell their stocks. What I discovered is that each stock has its own unique volatility that can be quantified –think of it as a stock’s “Volatility DNA.” I call this the Volatility Quotient (or VQ for short.) The VQ tells you how much room you can give a stock without getting stopped out too early. VQ measures how much uncertainty or noise there is in your stocks. More conservative stocks have lower VQs while more speculative/less certain stocks have higher VQs. The lower the VQ, the more stable the movement of that stock, while higher VQ percentages indicate the stock is more volatile in its market moves over time. For instance, the VQ on Valeant was 22.4% when Ackman first acquired his 5% stake on 3/15/2015. Had Ackman set a VQ stop loss at that time, he would have received a text or email alert telling him his stop had been hit. At that point, he could have sold his stake for a tidy billion-dollar gain.

apparently even the great Bill Ackman didn’t know when he lost all that money on VRX. To show you what I mean, I picked out 10 popular stocks. I created charts for each and included the unique Volatility Quotient the exact TradeStops sell price. One thing to keep in mind is that a stock’s VQ isn’t static. It changes on a weekly basis. Usually, the changes aren’t great, but they can add up over time. And if a stock makes a new high, the TradeStops sell price will be updated based on its most current VQ. Now before you read ahead to see those 10 stocks, there’s one more thing you should know about volatility. It turns out that volatility, as measured by a stock’s VQ provides the ability to easily determine something called “risk parity” in a portfolio of stocks. The big institutions manage their money with constant eye on risk parity. Simply stated, risk parity means equalizing the amount of money you’re putting at risk for each stock in your portfolio . In the examples below, we’ll see how much money you would invest in each stock if you decided to risk $1000 across all the stocks in your portfolio. I’ll close with the TradeStops mantra. This mantra guides everything we do here. It will help you become a better investor. It will allow you to see your investments more clearly than before. You will…. Risk less, make more. Dr. Richard Smith

How would you like to know exactly the right time to sell your stocks? Something that

3 | Knowing EXACTLY When to Sell Your Stocks

1. Apple, Inc. Ticker: AAPL VQ: 17.3% Total amount invested: $6,159.60 Current TradeStops sell price: $129.15 Amount at risk: $1000.00

3.  Berkshire Hathaway “B” Shares Ticker: BRK.B VQ: 11.7% Total amount invested: $18,989.95 Current TradeStops sell price: $156.30 Amount at risk: $1000.00

2. Bank of America Ticker: BAC VQ: 21.3% Total amount invested: $7,787.52 Current TradeStops sell price: $20.10 Amount at risk: $1000.00

4. Facebook Ticker: FB VQ: 20.5% Total amount invested: $5,781.36 Current TradeStops sell price: $121.40 Amount at risk: $1000.00

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5. iShares Gold ETF Ticker: GLD VQ: 11.6% Total amount invested: $10,551.20 Current TradeStops sell price: $108.60 Amount at risk: $1000.00

7. Johnson & Johnson Ticker: JNJ VQ: 11.5% Total amount invested: $9,799.02 Current TradeStops sell price: $114.30 Amount at risk: $1000.00

6. The Hershey Company Ticker: HSY VQ: 13.3% Total amount invested: $7,442.82 Current TradeStops sell price: $96.05 Amount at risk: $1000.00

8. Microsoft Corp. Ticker: MSFT VQ: 16.0% Total amount invested: $6,708.10 Current TradeStops sell price: $58.30 Amount at risk: $1000.00

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9. NVIDIA Corp. Ticker: NVDA VQ: 24.3% Total amount invested: $4,028.10 Current TradeStops sell price: $103.60 Amount at risk: $1000.00

10. Royal Gold, Inc. Ticker: RGLD VQ: 35.3% Total amount invested: $3,272.62 Current TradeStops sell price: $55.40 Amount at risk: $1000.00

Did you see what happened? For the individual stocks, we’re taking the exact same $1000 of dollar risk in each position. Because of this, the dollar amount we’re investing in each position is different. JNJ is a low-volatile stock so we can invest almost $10,000 in it and have the same amount of risk in the position as an almost $3300 investment in Royal Gold. Now, you can perform a similar exercise like this on your own, but with nothing like the precision of using TradeStops.

That’s because TradeStops’ was created to make it as easy as possible for you to manage all of your stock and fund investments using my proprietary Volatility Quotient and TradeStops sell-price tracking and alert tools. Getting out of the markets with small declines is the best way to preserve your capital during bear markets. I call this “winning by not losing”. Using TradeStops to help you ignore the noise of the markets and focus solely on the signals is the ultimate path if you want to invest smart, Risk Less and Make More.

6 | Knowing EXACTLY When to Sell Your Stocks