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Stop Loss Truncates Downside & Increases Upside

Stop Loss Truncates Downside & Increases Upside - #RiskManagement #ChartOfTheDay


  • We ran 1,000 simulations of a randomly selected 10-stock portfolio from a global universe. The portfolios were re-selected and re-balanced every year
  • The 1,000 random portfolios with stop loss beat the benchmark 97% of the time and generated an average return of 12.2% p.a.
  • Adding the stop loss to the top decile results in 8% higher terminal wealth
  • Adding the stop loss to the bottom decile results in 45% higher terminal wealth
  • Stop loss truncates the downside and increases the upside


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