1. What exactly does the 7% rule mean for stock market investors?
The 7% rule suggests selling a stock if its price falls about 7% below the buying price to limit losses and protect capital.
2. Why do many traders prefer the 7% rule instead of waiting for a stock to recover?
Waiting can turn small losses into large ones, while the 7% rule encourages early exit before more serious damage occurs.
3. Is the 7% rule suitable for beginners who are new to stock investing?
Yes, the rule offers a clear and simple way to manage risk and avoid emotional decisions during market swings.
4. Does following the 7% rule guarantee profits in the stock market?
No, the rule focuses on controlling losses rather than ensuring gains, helping investors stay disciplined over time.
5. Can long-term investors ignore the 7% rule when holding quality stocks?
Some long-term investors may adjust or skip the rule, especially when confident in a company’s long-term growth.