Comments on: Stop Loss Orders on Mutual Funds? http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/ A personal finance blog written by Preet Banerjee Wed, 08 Sep 2010 22:54:22 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Alex Fernandes http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4085 Alex Fernandes Mon, 28 Sep 2009 05:39:55 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4085 Thanks for sharing such great post, it will surely help me a lot, as i am not having such detailed information about this. Thanks for sharing such great post, it will surely help me a lot, as i am not having such detailed information about this.

]]> By: Preet http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4084 Preet Fri, 04 Sep 2009 20:54:53 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4084 @Mark Wolfinger - you are correct, but I think a lot of people would be okay with a one day lag. @Mark Wolfinger – you are correct, but I think a lot of people would be okay with a one day lag.

]]> By: RR Top 5: Back to School Edition | Realizing Retirement http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4083 RR Top 5: Back to School Edition | Realizing Retirement Fri, 04 Sep 2009 12:48:28 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4083 [...] Preet questions, why no Stop Loss Orders on Mutual Funds? [...] [...] Preet questions, why no Stop Loss Orders on Mutual Funds? [...]

]]> By: Mark Wolfinger http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4082 Mark Wolfinger Fri, 04 Sep 2009 03:41:57 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4082 Preet, But that's hardy a stop order. If I want OUT tonight, what good does it do me if I must wait until tomorrow night - only to see the market take a giant tumble (which is what I anticipated after my stop was triggered) Regards, Preet,

But that’s hardy a stop order. If I want OUT tonight, what good does it do me if I must wait until tomorrow night – only to see the market take a giant tumble (which is what I anticipated after my stop was triggered)

Regards,

]]> By: Preet http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4081 Preet Fri, 04 Sep 2009 01:36:07 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4081 @Mark Wolfinger - there could be workarounds. For example, a dealer notified me that they in fact do have a stop loss order facility for mutual funds. If the previous close triggers the notification, the advisor must get consent to redeem units by 1pm. It's an automated notification with a manual middlestep required. @Mark Wolfinger – there could be workarounds. For example, a dealer notified me that they in fact do have a stop loss order facility for mutual funds. If the previous close triggers the notification, the advisor must get consent to redeem units by 1pm. It’s an automated notification with a manual middlestep required.

]]> By: Stop Loss Orders on Mutual Funds? : WhereDoesAllMyMoneyGo.com « Mutual Funds http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4080 Stop Loss Orders on Mutual Funds? : WhereDoesAllMyMoneyGo.com « Mutual Funds Thu, 03 Sep 2009 22:52:36 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4080 [...] E­x­c­e­rp­t from­­: St­o­p Lo­ss O­rders o­n M­ut­ual F­unds? : WhereDo­esA... [...] [...] E­x­c­e­rp­t from­­: St­o­p Lo­ss O­rders o­n M­ut­ual F­unds? : WhereDo­esA… [...]

]]> By: Mark Wolfinger http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4079 Mark Wolfinger Thu, 03 Sep 2009 19:36:29 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4079 Patrick, Regarding the call option sale. Yes, you collect premium, but the downside protection is limited to the option premium. Preet, Yes, the practice seems unfair, but look at it from the perspective of the mutual fund managers. If they have a bunch of orders to redeem shares on a given day, they can sell some holdings to raise cash - at do it near the end of the trading day. But if they have stop orders, they may not know if the stop is triggered until after the market closes and the final ticks are in. If a lot of redemptions are triggered by a closing bell gap trade, that's not fair to the remaining shareholders. Patrick,

Regarding the call option sale. Yes, you collect premium, but the downside protection is limited to the option premium.

Preet,

Yes, the practice seems unfair, but look at it from the perspective of the mutual fund managers. If they have a bunch of orders to redeem shares on a given day, they can sell some holdings to raise cash – at do it near the end of the trading day.

But if they have stop orders, they may not know if the stop is triggered until after the market closes and the final ticks are in. If a lot of redemptions are triggered by a closing bell gap trade, that’s not fair to the remaining shareholders.

]]> By: Preet http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4078 Preet Thu, 03 Sep 2009 19:04:19 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4078 @Henry - depends on the investor. I don't think there is a right answer, more subjective. There is also the ability of some brokerages to offer trailing stops - the stop loss order increases as the stock price increases. So if you started at $50/share with a trailing stop of -$5, its initially set at $45/share. If the stock doesn't reach $45 before it reaches increases beyond $50 to say $55, the stop loss is re-adjusted to be fore $50/share. And so on. This protects against having a stop loss for $45/share and seeing the stock going from $50 to $200 and back down to $45 without every taking profits. @Henry – depends on the investor. I don’t think there is a right answer, more subjective. There is also the ability of some brokerages to offer trailing stops – the stop loss order increases as the stock price increases. So if you started at $50/share with a trailing stop of -$5, its initially set at $45/share. If the stock doesn’t reach $45 before it reaches increases beyond $50 to say $55, the stop loss is re-adjusted to be fore $50/share. And so on. This protects against having a stop loss for $45/share and seeing the stock going from $50 to $200 and back down to $45 without every taking profits.

]]> By: Preet http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4077 Preet Thu, 03 Sep 2009 19:00:50 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4077 @Patrick - not the same effect. A stop loss can trigger the sale of your stock on the way down. A written call can trigger the sale of your stock on the way up. @Patrick – not the same effect. A stop loss can trigger the sale of your stock on the way down. A written call can trigger the sale of your stock on the way up.

]]> By: Patrick http://wheredoesallmymoneygo.com/stop-loss-orders-on-mutual-funds/#comment-4076 Patrick Thu, 03 Sep 2009 15:20:58 +0000 http://www.wheredoesallmymoneygo.com/?p=1232#comment-4076 Aren't you better off selling call options than using stop-loss orders? Same effect, but you pocket the premiums. Aren’t you better off selling call options than using stop-loss orders? Same effect, but you pocket the premiums.

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