Divorce and the Stock Market
By Al Thomas
The most recent statistics show that about 50% of all marriages end in divorce. It is not very encouraging to
enter into any kind of relationship knowing that it only has a 50/50 chance of being successful. Failure at
anything is never pleasant, but there is one good thing about divorce. You are now free to try again and hopefully
this time you will not make the same mistake.
Now I want you to think about divorce and the stock market. Do you own any stock or mutual funds that are
selling for less than you paid for them? If you have owned any equities during this past three years I will be
willing to bet you have some losers in your portfolio. Don’t you think it is time to think about a divorce, a
divorce from a losing situation?
Suppose you sold everything today and put it all in a money market account paying 1%? I know what you think
about 1%. Suppose you had dumped those losers 2 years ago and been in cash all this time? Would you be money ahead
at 1%? I’ll bet you would.
You may be saying you don’t know whether this is a good time to sell or buy more. Here in one way to make that
decision. Analyze the stock or fund you have. If you would not buy more of it now then the smart thing to do would
be to sell. And don’t fall for the big Wall Street lie about dollar cost averaging.
Here is another way to determine how and when to sell – let the market tell you. You can place a stop-loss order
with your broker for any amount you wish. Say your stock is selling for $20/share. I like to limit my loss to about
10% so I have my broker enter an order to sell me out if the stock drops to $18. If it keeps advancing I raise the
stop loss order every week so that it is trailing along behind about 10%. When it advances to $30 my stop would
then be at $27. This way I don’t have to guess about where to get out. Brokers don’t like to do this because they
have to watch your account, but don’t let him talk you out of it. You don’t want to lose everything like you might
in a divorce. Limit the damage. If you own mutual funds you will have to watch these yourself as you cannot place a
stop-loss order; you have to call the broker to tell him to sell.
When you are in a bad marriage things just seem to get worse and worse. You could lose everything. When you are
in a long-term bear market as we are now it is the same. Your financial assets become less and less. At least in
the stock market you can limit your losses. Don’t call a lawyer, call the broker and get out.
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