Exit Strategy

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Definition of 'Exit Strategy'

An exit strategy is a plan for getting out of a financial investment at a profit. It is important to have an exit strategy in place before you invest, so that you know when to sell and how much to sell. There are a few different factors to consider when developing an exit strategy, including the investment's risk, your time horizon, and your financial goals.

* **Risk:** The risk of an investment is the potential for losing money. Some investments are riskier than others, and it is important to consider your risk tolerance before making an investment. If you are not comfortable with the risk of losing money, you may want to choose a less risky investment.
* **Time horizon:** Your time horizon is the length of time you plan to hold an investment. If you need the money in the near future, you will need to choose an investment that is less likely to lose value in the short term.
* **Financial goals:** Your financial goals will also help you determine when to sell an investment. If you are saving for a down payment on a house, you may want to sell your investment when you have reached your target savings goal.

Once you have considered these factors, you can start to develop an exit strategy. Here are a few tips:

* Set a target price for your investment. This is the price at which you will sell your investment, regardless of the market conditions.
* Set a stop-loss order. This is an order to sell your investment if it falls below a certain price. This can help you protect your investment from losses if the market turns against you.
* Monitor your investment regularly. Keep an eye on the market and your investment's performance. If the market conditions change or your investment's performance starts to decline, you may need to adjust your exit strategy.

An exit strategy is an important part of any investment plan. By taking the time to develop an exit strategy, you can increase your chances of making a profit on your investments.

Here are some additional tips for developing an exit strategy:

* Be realistic about your goals. Don't expect to make a fortune overnight. Set realistic goals for your investments and be patient.
* Don't get emotional. It's easy to get caught up in the excitement of the market and make impulsive decisions. Don't let your emotions get the best of you.
* Diversify your investments. This will help you spread your risk and protect your portfolio from losses.
* Get professional advice. If you're not sure how to develop an exit strategy, talk to a financial advisor.

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