Page 1161 - How to Make Money in Stocks Trilogy

146 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

If you cut a loss at 8%, you only need a 9% gain to get back to breakeven.
But the deeper your loss becomes, the harder it is to make yourself whole
again. If you take a 50% loss, you need to double your money just to break
even. It’s not that often you grab a 100% gain, and when you do, you want to
profit—not just make up for a past loss!

(Buy and) Holder Beware!
This is a good time to recall 2 key facts we touched on earlier. If they don’t
reveal the dangers of “buy and hold” investing, I don’t know what will.

• Once leading stocks eventually peak, they decline 72% on average.
Here’s what happened to selected leaders in the 2007–2008 bear market.
It’s a vivid reminder that even leading CAN SLIM stocks eventually peak
and must be sold.

Declines of Selected Leading Stocks in 2007–2008 Bear Market
Company Name % Decline

Apple –56%
Baidu –67%
China Mobile –63%
Dick’s Sporting Goods –71%
Google –61%
Intuitive Surgical –71%

That may look scary, but remember: You can easily avoid that damage.
Lock in the bulk of your profits and cut short any losses by fol-
lowing the Selling Checklist.
• Only about 1 in 8 stocks that led in the prior bull market go on to
lead again in the next one.
Those are not good odds.
Now you may be thinking, “What about stocks like Apple or
Priceline.com or Monster Beverage? They made big gains in multiple
bull markets.”
Yes, there are exceptions. But they’re relatively rare. And as a former
leader is dropping 72% or so, do you really want to take that loss and bet