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> Some people have said that some of the biggest gains in the stock market are just before it drops. You do not want to miss out on these, since that is often where the 9.5% return on stocks comes from.

This may sound like a stupid question but if you don't sell at that time (hold good investments forever etc), and you don't know that it's the peak at the time, how do you lock in those gains?

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It is a good question. Locking in gains means selling. But you do not know the right time to do that unless you know something no one else does. Sell if you want less volatile returns to get a monthly income during retirement for example. Otherwise you are trying to time the market.

There may be some kind of magic options strategy to lock in those gains, but it also would include taking on other risks (interest rate changes, market risk, commodities etc.) and you have to have a big bank roll to play in that game to make it worth while--and now you have another job which could be full time to manage it all...

I guess to answer your question in another way, you lock in those gains by not trying to time the market, by paying the lowest commissions and fees possible. :)

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