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

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

*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.