Daily Wealth

David Klein couldn't have been more wrong...

In 2019, Klein was the CEO of Canopy Growth (CGC). At the time, Canopy was the world's largest cannabis company by market share.

A few years later, both Kamala Harris and Donald Trump said positive things about cannabis on the 2024 campaign trail. So, Klein made an election forecast.

As he told shareholders last September, the two candidates were setting up a bullish break for Canopy...

I think from a political standpoint, the cannabis industry and Canopy in particular are well positioned regardless of the winner of the presidential election.

But Canopy has had a tough time attracting buyers. The stock has nosedived since hitting a multiyear peak in February 2021. As of last September, it was down 99%.

While presidential candidates said some nice things... the market had other plans. And Klein isn't alone when it comes to misinterpreting market tailwinds.

Fortunately, one tool can help investors take the guesswork out of knowing when to exit a position. And it's easy to start using it in your portfolio now.

Let me explain...

Protect Your Investments in a Stock Market Crash

As I wrote last week, under the Trump administration, the stock market is off to its worst start to any presidency in more than two decades.

On April 2, President Trump revealed his much-discussed tariff plan on foreign imports. In addition to a flat 10% import tax, the plan carried much higher duties for some of America's biggest trade partners.

Afterward, stocks suffered one of their worst weeks of this century. And the market has remained rocky.

The S&P 500 is down 5% since April, as is the bond market. And oil has plunged 16%.

Cannabis stocks haven't been spared in the Trump sell-off, either. If you had bought on Klein's advice in September, when Canopy was already 99% off its multiyear peak, you'd be down 81% today.

Worse, we should expect more volatility to come. Trump has paused some countries' reciprocal tariffs for 90 days. But the import tax on China keeps rising. It's sitting at 145% as I write.

That's enough to completely upend the global supply chain. And it means that an escalating trade war could still be in the cards.

So, we'll likely see more turbulence ahead for stocks...

As we've seen with Canopy, assets can fall much further than forecasters expect. That's why you need an exit plan for when markets turn volatile...

I recommend using stop losses to keep your portfolio safe.

A stop loss is a predetermined level where you'll exit an investment position. For example, you could set your stop for when a stock falls a certain percentage off its highs... or when it hits a previous low.

We often like to use a 25% trailing stop as a rule of thumb. That means we sell when a stock falls 25% from its highs. But there's nothing magical about that number. The most important part is to have a plan.

Now, most brokerages let you enter stop losses when you buy an asset... But doing so can be risky. There's nothing stopping the market makers from manipulating prices just enough to trigger your stop, washing you out of the position at a loss.

So you should always keep track of your stop losses on your own – either with a tracking document or simply in your head. You can also use a third-party tracker like our corporate affiliate TradeSmith.

With stop losses, you can escape downtrends before the worst of the pain occurs. By keeping your losses smaller than your gains over time, you'll be more successful... And in hard times, you'll live to fight another day.

Good investing,

Sean Michael Cummings

Protect Your Investments in a Stock Market Crash

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