stop losses, page-4

Hi finch, interesting post but I think a few things need to be corrected.

Firstly to clear up a couple of misconceptions about Berkshire, people try and emulate the Buffett approach yet the reality is the majority of Berkshire' significant equity transactions don't occur on the open market. To follow the money flow is a furphy as the money flow doesn't exist until it's over and done, by which time you're simply part of the herd.

Berkshire have a few advantages over mum and dad investors when they get it wrong, mostly they have the strength to influence management if they need to or even change management and business focus if it's warranted. In effect this is a form of stop loss or position management. We can only use the tools available to us, their tools have far more power and influence than yours or mine will ever have.

A stop loss isn't just about error, it isn't just about limiting a loss, it is more about limiting risk and increasing return. The objective of an investor isn't about making a profit, it's about gaining value. If you're able to gain ten percent simply by exiting a position and purchasing at a discounted level then surely that must be considered. Being stopped out of a position in many cases is a positive outcome, not a negative. It also doesn't mean your bias is incorrect, just that your strategy at that time was incorrect.

To dismiss entry/exit management is to dismiss error, no one is that good, we're all wrong at some stage.