The Assassins' Framework
Cut losses, let winners run
The Assassins' Framework is a investing strategy that focuses on cutting losses and letting winners run. It involves setting a stop-loss level and sticking to it, even if it means selling a losing investment. The framework also emphasizes the importance of having a plan and being disciplined in one's investing decisions.
- Cut losses quickly to minimize damage
- Let winners run to maximize gains
- Have a clear plan and stick to it
- Set a stop-loss levelDetermine the maximum amount of loss you are willing to accept on an investment and set a stop-loss level accordingly.Pro tipUse a stop-loss level that is based on a percentage of the investment's value, rather than a fixed amount.WarningBe careful not to set the stop-loss level too low, as this can result in selling a winning investment too early.
- Monitor the investment's performanceKeep track of the investment's performance and be prepared to sell if it reaches the stop-loss level.Pro tipUse a portfolio management tool to help monitor the investment's performance and receive alerts when the stop-loss level is reached.WarningBe careful not to get emotionally attached to the investment and hesitate to sell when the stop-loss level is reached.
- Sell the investment if it reaches the stop-loss levelIf the investment reaches the stop-loss level, sell it immediately to minimize further losses.Pro tipUse a limit order to sell the investment at the stop-loss level, rather than a market order.WarningBe careful not to sell a winning investment too early, as this can result in missing out on potential gains.
An investor bought shares in Genmab, a Danish biotechnology company, but the stock performed poorly and the investor sold at a 30% loss. If the investor had not sold, they would have lost 65% of their investment.
An investor bought shares in Dods, a media company, but the stock performed poorly and the investor sold at a 39% loss. If the investor had not sold, they would have lost 63% of their investment.
An investor bought shares in Royal Bank of Scotland, but the stock performed poorly and the investor sold at a 16% loss. If the investor had not sold, they would have lost 82% of their investment.
The framework is based on the author's experience working with a group of investors who were able to consistently outperform the market by cutting their losses and letting their winners run. The author observed that these investors were able to do this by being disciplined and having a clear plan, rather than being driven by emotions.