“How much unclaimed money do you have in the stock market?”
That’s the question I asked an audience of several hundred in Las Vegas this past week … and I wasn’t joking.
I’ve been researching investor performance in the stock market for over a decade now. If there’s one thing that I’ve learned, it’s that investors are leaving money on the table all the time … with nearly every investment.
There are two main ways that I’ve found that lead investors to leave money on the table with their investments – selling at the wrong time and investing the wrong amount. Let me illustrate my point with the story of one investor who recently shared his investment history with me.
Mark is an airline pilot with a major domestic airline. He’s been investing on his own for at least 7 years now and has multiple investment accounts in which he manages his investments. Like most of us, he has a hard time keeping up with his portfolio and investment opportunities given his other responsibilities.
In spite of the challenges, Mark has done a decent job. Here’s a picture of Mark’s performance in one of his accounts over the past 7 years.
Mark experienced muted but steady equity growth over the period of 2009 – 2015. Then in early 2016 his equity took a brief hit before soaring in 2016. Clearly Mark has been involved in the precious metals sector, amongst other things.
One of Mark’s investments was in CVS, the drugstore retailer. Mark bought CVS in early 2011 and was still holding it at the time of this study. He originally invested $2,696 into CVS. As of the middle of September, Mark was up $4,133 on this investment or about 150%.
CVS had a VQ of 24% at the time of Mark’s original investment. Given Mark’s interest in the precious metals sector, CVS was actually one of his more conservative investments. Let’s take a look at how Mark left money on the table with this investment.
The first and biggest opportunity to have claimed more money from this investment would have been to invest more money in it. The volatility-based position sizing algorithm that TradeStops offers helps investors to put more money into their more conservative investments and put just the right amount of money into their more speculative investments.
For Mark’s portfolio size and the relatively conservative nature of CVS, he could have invested $17,202 in CVS instead of his original more modest investment of just $2,696.
The second opportunity Mark had to maximize gains was to sell CVS at an optimal time. CVS has done well for the first 4+ years Mark owned it. I mentioned that the original VQ on CVS was 24%. As CVS rose and volatility contracted, the VQ on CVS also contracted to a very conservative 12.4%.
When CVS started to fall in 2015, the VQ based trailing stop system that TradeStops offers, stopped the stock out at around $98 in September of 2015.
Here’s how that all looks on a chart:
By putting more money into a conservative stock like CVS and exiting based on an intelligent trailing stop system, Mark could have claimed an extra $26,124 dollars of profit on just this one investment.
Impressive, isn’t it?
When we looked at all of Mark’s current investments and applied intelligent position sizing and stop loss strategies, we found a very compelling picture.
Using Mark’s exact same investments with the exact same entry dates and only changing the amount invested in each position and the exit point, Mark could have claimed an extra $132,589 from just this one portfolio.
That’s 73% extra in unclaimed profits … while taking the guesswork out of critical investment decisions.
So I ask you, how much unclaimed money are you leaving in the stock market?
Make more. Risk less,
