how should we manage the risk of a fall though?
should we have some stops in place?
@hemphill ,
By "stops", I assume you mean "stop losses".
I personally don't believe in the use of stop losses.
I think they are largely constructs of the stockbroking industry, designed to create additional market activity and, hence, more brokerage commission for stockbrokers.
What I do, instead, is I make an assessment of the intrinsic value of a business - based on its Free Cash Flows - and if the market value of the business is sufficiently below my assessment of intrinsic value, I buy it.
And then I hold it until it reaches my valuation.
I am agnostic about the exact path the share prices takes as it moves from the price at which I purchased it, to the price at which I think it is fully valued.
In that light, I feel no need to take any action to mitigate the risk of a fall.
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