Using Stop Orders in Uncertain Times

Investors may face heightened risks during periods of market volatility. One strategy for safeguarding your investments during these turbulent times is the use of stop orders. Stop orders aren't just tools for selling off underperforming assets. They can also serve as a comprehensive approach for protecting your portfolio gains while adhering to your investment strategy.

A stop order is a direction to buy or sell a security once it reaches a specified price, known as the stop price. They can be used across various asset classes, including ETFs, mutual funds, and commodities.* This versatility makes them a valuable investment tool, especially during uncertain times. Once triggered, your financial professional will execute the order at the best available price. This mechanism may help prevent further losses in a declining market or lock in profits during a rally.

Emotional Relief

A primary benefit of using stop orders is the emotional relief they offer. Market fluctuations can trigger panic selling or irrational decision-making. Having a stop order in place means you're not glued to your screens 24/7, anxiously waiting for the right moment to act. Instead, you have a preset strategy, allowing for a more objective response to potential market downturns.

Additionally, stop orders can aid in risk management. By using stop orders, you effectively create a safety net that helps manage downside risk. For example, if a stock you own has made significant gains, you can set a trailing stop order. This allows you to capture profits while still giving the investment room to grow.

Hypothetical Example: You've invested heavily in a tech company whose stock has surged due to a product launch. As the price climbs, you might set a stop order at a percentage lower than the peak price. If the stock price begins to slide after a short-lived rally, your stop order kicks in, selling your shares before they can drop significantly. This strategy secures your profits and mitigates potential losses, allowing you to reinvest your capital elsewhere.

Discipline and Leverage

Integrating stop orders into your investment strategy isn't just about selling losers—it's about maintaining a disciplined approach to managing your wealth. They provide you with the leverage to navigate market fluctuations with more confidence and peace of mind. So, as you consider your strategy with your financial advisor, don't underestimate the power of stop orders. They're invaluable in your quest to protect portfolio gains, ultimately allowing you to focus on the bigger picture: building and maintaining longterm wealth in an ever-changing market.

*Investors should read the prospectus and consider the investment objectives, risks, charges, and expenses of the fund before investing. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their investment. Past performance won't guarantee future results.