Why the Exit Plan Matters More Than the Entry
Almost all attention goes to when to buy. Every serious loss I have seen was determined by what happened at the other end.
Entry gets the analysis. Charts, timing, accumulation strategies, arguments about whether now is a good price.
Exit gets almost nothing, and exit is where the outcome is determined.
Why entry matters less than it feels
Over a long horizon, the difference between a good entry and a mediocre one is modest. Averaging in removes most of it. The variance introduced by entry timing is small compared to the variance in the asset itself.
Over the same horizon, the difference between exiting at a considered moment and exiting at a panicked one is enormous, and it is entirely within your control.
The four ways people exit
By plan. A written rule fires and is followed. Rarest.
By exhaustion. Month three of a decline, arguments assembled afterwards. Most common.
By force. An unexpected expense, a margin call, a life event. Determined by the liquidity buffer rather than by any view.
By drift. Never deciding, holding indefinitely, including through a thesis failure. Looks like patience and frequently is not.
Only the first is a decision. The other three are outcomes of an arrangement made earlier.
What a written exit plan contains
Position size rules. Trim back to target when above the band, on a quarterly date. This is profit-taking without requiring a forecast.
Invalidation conditions. What would have to be true about the asset, not the price, for me to exit entirely. Three per position, specific and checkable.
Liquidity requirements. What must be held outside the asset so that force is never the mechanism.
Execution details. Where the sale happens, over what period, and how the proceeds are handled. A plan that requires a device from a drawer and a forgotten passphrase will be deferred.
The execution part people skip
I sell across several days rather than in one transaction, through the exchange I have used since 2021, and I decide what happens to the proceeds before selling rather than afterwards.
The last part is not trivial. The one time I did not, the cash sat for two months while I thought about it, which is its own cost and its own kind of indecision.
The document
One page, written in a calm month, amended only in calm months, reviewed quarterly.
It has fired twice in five years: once for a rebalance I did not want to make, and once for an exit that was harder than any decision to hold has ever been.
Both times, the fact that the reasoning had been done by a version of me with no position in the answer was the entire reason I was able to follow it.
The summary
Entry determines your cost basis. Exit determines your result.
Almost everyone spends their preparation on the first and improvises the second, at the moment they are least equipped to improvise anything.
This is a personal account of holding through market cycles. It describes what one person did and why. It is not a recommendation, and past cycles do not predict future ones.