Thread by @AffordAnything

I don't recommend individual stock picking for 90-95% of your portfolio (if you choose to do it at all).

But if you hold individual stocks, know your ideal sell price and/or stop loss price.

Unlike index funds, individual stocks are not necessarily ... /1 #Thread 👇🏾

... an asset that you want to buy-and-hold forever. After all, how many companies have lasted for 50+ years?

Instead, you'll want to decide -- upfront -- that once a stock crosses $ X per share, or enjoys Y% in gains, you'll either (1) sell, or (2) enter a stop-loss order. /2

A stop-loss order allows you to let the asset continue growing gains indefinitely, but automatically sells the stock once it drops below a threshold that you choose.

It allows unlimited upside but protects your downside, thus locking in your gain (or mitigating your loss). /3

You can only set a stop-loss order for a price that's *below* the current price at which the stock is trading.

So if you're holding a stock that's grown in value, and you want to let it ride but set a safeguard that allows you to lock in those gains, you can use a stop-loss. /4

Likewise, a stop-loss can also limit your principal downside.

For example, at the time you place the trade, you can set a stop-loss for 10% below your purchase price, thus limiting your potential loss. (Alternately, if you expect volatility, you can set limit buy orders. /5

Again, I wouldn't recommend foraying into the world of individual stocks because "everyone else is doing it." You can build a fantastic retirement portfolio on index funds alone.

But if you hold individual stocks, know your "exit rules" *before* you buy. /6 #endthread