Trailing Stop Loss order in my Vanguard Brokerage accts.

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cobra911
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Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by cobra911 »

After doing a BH search on this topic, I found only one brief entry... so here goes.

I have 100% of my equity assets in various VG accounts (both tax deferred and taxable) in a mostly BH conservative allocation.
As a result, my total portfolio value has increased significantly through this incredibly long bull run. Being 63 YO and retired now and not willing to risk another 2008 downturn, I looked into placing Trailing Stop Losses on all holdings that would not trigger taxable events in my Vanguard Brokerage accts. Problem is... VG appears to NOT have this option for trades :?: Am I missing something? Is there a "work around" where I can achieve this without having to transfer some accounts to Fidelity or Schwab where this trade tool is provided? Thanks for any insights!
starboi
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by starboi »

Are you trying to apply it to a mutual fund?
Topic Author
cobra911
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by cobra911 »

Yes... some Mutual Funds held in non taxable accts and also ETF Funds and Individual stocks... But there is no option to set a Trailing Stop Loss :confused
Thanks
runninginvestor
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by runninginvestor »

I don't believe vanguard allows you to do this online, you may be able to do it by calling the broker. But that may come with an added fee for the trade.

I know a few other brokerages do allow you to do this, though they may charge transaction fees for the funds you hold.
starboi
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by starboi »

Investopedia says you can't do stop loss orders on a mutual fund.

https://www.investopedia.com/ask/answer ... l_fund.asp
AHK-Hero
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by AHK-Hero »

This is an interesting strategy I haven't seen discussed before. I'm wondering why you would pursue it instead of switching to a more conservative asset allocation where you can stomach the large downturns?

For example, what happens if all your stop-loss orders trigger taking you completely to cash? Now you have the problem of timing when to get back into equities (assuming you're not OK with being all cash for the duration of your retirement). And I think most people on this forum would agree that market timing is difficult, if not impossible.
exodusNH
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by exodusNH »

cobra911 wrote: Tue May 25, 2021 10:08 am After doing a BH search on this topic, I found only one brief entry... so here goes.

I have 100% of my equity assets in various VG accounts (both tax deferred and taxable) in a mostly BH conservative allocation.
As a result, my total portfolio value has increased significantly through this incredibly long bull run. Being 63 YO and retired now and not willing to risk another 2008 downturn, I looked into placing Trailing Stop Losses on all holdings that would not trigger taxable events in my Vanguard Brokerage accts. Problem is... VG appears to NOT have this option for trades :?: Am I missing something? Is there a "work around" where I can achieve this without having to transfer some accounts to Fidelity or Schwab where this trade tool is provided? Thanks for any insights!
Mutual funds are priced at the end of the day. You can't really issue a future price sale since you don't know the price until the next day.

If your VG mutual fund has an ETF share class, you can ask Vanguard to convert you to it. Then you can transfer it to another brokerage with more functionality.

I'm confused about your tax worries, though. If you sell without a taxable event, it means that you lost money. How is losing money better than paying X% of your /gain/ to the government? (Remember, if you bought something for $1,000 and now sell it for $1,500, your tax bill is only applied to the $500. You're not paying taxes on $1500, at least in a taxable account.) With your tax-deferred account don't have to worry about any of that.

One option for your taxable is to take enough profit to max out the 15% capital gains bracket. You can invest that money into bond funds, or whatever safer/safe asset you prefer. Just keep in mind that the safe assets are only safe from loss, not from inflation, whatever that may wind up being.

It really sounds like you're asset allocation is too aggressive for you. Perhaps if you were 50/50 or 40/60, you'd be less nervous. Just keep in mind that even the most conservative VG fund is still 20/80. You need some risk to stay ahead of inflation. With something like 50/50, a 50% drop in the stock market would only drop your portfolio by 25%. It's overwhelmingly likely that it will recover given some time.
Topic Author
cobra911
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by cobra911 »

starboi wrote: Tue May 25, 2021 2:39 pm Investopedia says you can't do stop loss orders on a mutual fund.

https://www.investopedia.com/ask/answer ... l_fund.asp
You are correct... I meant my ETF's and individual holding. Sorry for the confusion
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cobra911
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by cobra911 »

"I'm confused about your tax worries, though. If you sell without a taxable event, it means that you lost money. How is losing money better than paying X% of your /gain/ to the government? (Remember, if you bought something for $1,000 and now sell it for $1,500, your tax bill is only applied to the $500. You're not paying taxes on $1500, at least in a taxable account.) With your tax-deferred account don't have to worry about any of that."
When I said "without a taxable event" I meant place the Trailing Stop Loss only in my tax deferred accts (IRA's). Also, a triggered Trailing Stop Loss does not necessarily mean I would be selling at a loss. Example: I buy a stock at $20 and it gradually climbs to $30. If I set my Trailing Stop Loss at 10% then the sell would be triggered should the share price drop to $27 (That's 10% or $3). I still locked in a gain of $7/share ... even if the share price continued to drop 20% or $6. Hope that makes sense.
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David Jay
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by David Jay »

cobra911 wrote: Wed May 26, 2021 1:39 pmExample: I buy a stock at $20 and it gradually climbs to $30. If I set my Trailing Stop Loss at 10% then the sell would be triggered should the share price drop to $27 (That's 10% or $3). I still locked in a gain of $7/share ... even if the share price continued to drop 20% or $6. Hope that makes sense.
Trailing stop orders do not work consistently in the manner you want them to work. Here are two examples of things that can go wrong:

1. A price drop from $30 to $27 (say, a rumor) followed by an immediate rebound to $35 (when the truth turns out to be the opposite of the rumor). You just locked in a 23% loss and you are out of the market as the stock continues to climb.

2. An extremely rapid price drop to $24, so fast that your order can’t be filled at $27, instead your stock is sold at $24 for a 20% loss.

Here is a classic quote from “Nisiprius” that carries so much wisdom that I incorporated a portion in my signature:
In order to get the "risk premium" you really do have to take the risk. There's no magic formula for vastly reducing the risk of your stock market investments by simply avoiding short periods of obvious danger. If there were, everybody would do it and the stock market would not be risky and there would be no risk premium.

The stock market is risky. It is a form of greed to believe that there is some easy, effective way to get the risk premium without actually taking the risk. Many people go through a stage in which they engage in delusional thinking:
a) The stock market has had high returns. That's good, I'd like that.
b) The stock market has had high risk. I don't like that.
c) I can't accept "a" and "b" are a package deal.
d) The stock market is risky for everybody else, but not for me, because I can do something clever and get the return without the risk.
I believe that the better approach for you is to permanently adjust your Asset Allocation to something more appropriate for an individual in early retirement.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
000
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by 000 »

Vanguard Brokerage does not support trailing stop loss orders at all.
MishkaWorries
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by MishkaWorries »

cobra911 wrote: Wed May 26, 2021 1:12 pm
starboi wrote: Tue May 25, 2021 2:39 pm Investopedia says you can't do stop loss orders on a mutual fund.

https://www.investopedia.com/ask/answer ... l_fund.asp
You are correct... I meant my ETF's and individual holding. Sorry for the confusion
Vanguard doesn't support a trailing stop loss on ETFs and stocks? Are you sure? I see it at Schwab, Fidelity and TDAmeritade. I would guess every broker offers it since it's well known in the trading community.

I can't vouch for it's effectiveness but I see it as an option everytime I buy an ETF.

Edited: nevermind! 000 says Vanguard doesn't offer that option.
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cobra911
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by cobra911 »

David Jay wrote: Wed May 26, 2021 6:37 pm
cobra911 wrote: Wed May 26, 2021 1:39 pmExample: I buy a stock at $20 and it gradually climbs to $30. If I set my Trailing Stop Loss at 10% then the sell would be triggered should the share price drop to $27 (That's 10% or $3). I still locked in a gain of $7/share ... even if the share price continued to drop 20% or $6. Hope that makes sense.
Trailing stop orders do not work consistently in the manner you want them to work. Here are two examples of things that can go wrong:

1. A price drop from $30 to $27 (say, a rumor) followed by an immediate rebound to $35 (when the truth turns out to be the opposite of the rumor). You just locked in a 23% loss and you are out of the market as the stock continues to climb.

2. An extremely rapid price drop to $24, so fast that your order can’t be filled at $27, instead your stock is sold at $24 for a 20% loss.

Here is a classic quote from “Nisiprius" that carries so much wisdom that I incorporated a portion in my signature:
In order to get the "risk premium" you really do have to take the risk. There's no magic formula for vastly reducing the risk of your stock market investments by simply avoiding short periods of obvious danger. If there were, everybody would do it and the stock market would not be risky and there would be no risk premium.

The stock market is risky. It is a form of greed to believe that there is some easy, effective way to get the risk premium without actually taking the risk. Many people go through a stage in which they engage in delusional thinking:
a) The stock market has had high returns. That's good, I'd like that.
b) The stock market has had high risk. I don't like that.
c) I can't accept "a" and "b" are a package deal.
d) The stock market is risky for everybody else, but not for me, because I can do something clever and get the return without the risk.
I believe that the better approach for you is to permanently adjust your Asset Allocation to something more appropriate for an individual in early retirement.
- If example #1 were to happen... I would be ok with missing a quick reversal to the upside. I would have gotten out with a profit I can live with. No regrets.
- Now for example #2: Is that scenario realistic? A rapid market crash can certainly happen but wouldn't a Stop Loss trade be triggered before a 20% drop happened? Personally, I don't know... never been there/done that . If my Vanguard brokerage acct. is that slow reacting... I certainly would like to know that.
- Unfortunately, I have discovered that Vanguard does not have a Trailing Stop Loss option... they have a conventional Stop Loss... no Trailing. All other major houses do (Ameritrade, Schwab, Fidelity etc). This is a good discussion though and I appreciate the feedback. One last comment... I too like reading Nispirius posts... lots of wisdom there, but I would love to hear his opinion of Trailing Stop Losses and if "The stock market is risky for everybody else, but not for me, because I can do something clever and get the return without the risk." really applies to a Trailing Stop Loss?
Thanks
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retired@50
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by retired@50 »

You may not be able to place a trailing stop loss order, but you could build a watch-list at Vanguard, and build in email alerts.

This would at least let you know when the events occur. Given the speed at which the market moves on some days, it may or may not provide any actionable benefit.

Regards,
This is one person's opinion. Nothing more.
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David Jay
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by David Jay »

cobra911 wrote: Thu May 27, 2021 6:51 pm- If example #1 were to happen... I would be ok with missing a quick reversal to the upside. I would have gotten out with a profit I can live with. No regrets.

What then? What will be your strategy going forward? You are so worried about “locking in” gains, but what you need is a long term strategy that you can maintain over the next 20 or 30 years.

- Now for example #2: Is that scenario realistic? A rapid market crash can certainly happen but wouldn't a Stop Loss trade be triggered before a 20% drop happened? Personally, I don't know... never been there/done that . If my Vanguard brokerage acct. is that slow reacting... I certainly would like to know that.

If no one is bidding over $24, it doesn’t matter how fast your brokerage is. As soon as the price breaks $27 (or whatever the order price) they will immediately sell at the current bid price. If the bid is $24, then you will get $24. Never forget that “the market” really is a market, with sellers and buyers.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Leezee
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by Leezee »

Yeah, but at least he will have sold those shares before it could go so low that he loses half, all (or whatever his threshold is for loss) of the balance in the account. That would be the purpose of setting his stop-loss.
TJat
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by TJat »

It sounds like this is an asset allocation problem rather than a trailing stop loss question. If you want to lock in gains, sell now. But if you’re primarily worried about a 2008 crash, you have an asset allocation that is too risky..and that’s okay. People tend to get conservative as they age and/or their assets grow, but recognize that for what it is and not some problem that needs a clever solution. If trailing stop losses were brilliant, everyone would use them.
MrJedi
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by MrJedi »

I really dislike these types of orders, since there might be some anomaly event or even just a very large overnight movement and your order gets filled without even a chance to review what happened.

I'd much rather just get an alert/notification to be made aware of major market movement (and likely take no action or maybe rebalance since I am at a comfortable AA, but at least it's a conversation starter)
BigJohn
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by BigJohn »

I’m about your age and think you’re making this more complicated than it needs to be. You’re uncomfortable with your high stock allocation due to this ongoing bull market. You have funds in tax deferred accounts that can be changed without tax implications. In your position I simply sell stocks and buy bonds in my IRAs to get back to my desired assets allocation. I’ve done this at least once or twice a year for the last several years.

Why play with fire that some of these circumstances mentioned above could transpire? Recognize that you’ve won the game and just take some risk off the table now. :beer
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by grabiner »

Leezee wrote: Wed Jul 21, 2021 7:43 pm Yeah, but at least he will have sold those shares before it could go so low that he loses half, all (or whatever his threshold is for loss) of the balance in the account. That would be the purpose of setting his stop-loss.
Even if a stop-loss works as intended (rather than selling at a lower price than the stop price), it only serves that purpose if you sell and never invest again. If you have a $10K investment and you sell when the price declines to $8K, you have $8K in cash. Whenever you next invest that $8K, that investment might drop another 20% and leave you with $6400.
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tigerdoc93
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Re: Trailing Stop Loss order in my Vanguard Brokerage accts.

Post by tigerdoc93 »

Stop losses usually work as you expect. However, sometimes a stock or etf will gap down during after hours and result in selling of the stock at opening price.
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