Stopped and Lost

My dumbest investment was in Intel stock. I bought 100 shares in 1995 at what was then $62 per share. They advanced to $78. Then my broker advised me to enter a "stop-loss" order to protect my profits. Duh ... sounded like a good idea. Sure would hate to lose those profits. So we placed an order to sell if the shares fell to $74. Of course, they did, and my shares were sold. A few years later, they were at $165! Thump! That's the sound of me kicking myself.

— Matt Sigman, Santa Clarita, Calif.

The Fool Responds: Your purchase price, adjusted for splits, would be around $7.30 per share, and Intel was recently trading around $14.20, which would have only doubled your money in 13 years. That's an annualized growth rate of about 5 percent. You'd have increased your investment 10-fold, though, if you'd sold in 2000, before the bubble burst. We're wary of stop-loss orders. Yes, one can protect your profits, but it can also kick you out of something that will rise to great heights later, just because it temporarily dips. Proceed with caution.

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