Exit criteria

Conditions set in advance that oblige you to reconsider a position - in both directions, for the thesis breaking and for the position growing beyond its intended size.

Example

'Two consecutive reported periods with revenue growth below 6%', alongside 'reconsider if this ever exceeds 10% of the portfolio'.

Important

A condition that can be softened as it approaches is worth nothing, and that is exactly when the revision feels most reasonable. Note also that it is a trigger to decide again rather than an instruction to sell - treated as automatic, it gets quietly dropped the first time it fires at an inconvenient moment.

Related terms

• Walk-away price — The price above which, or the specific finding after which, you have decided in advance not to proceed - written down and dated before the process begins.
• Investment thesis — A written statement of what you believe about an investment, at what price it is worth owning, and what specific observation would tell you that you were wrong.
• Position size — How much of your total capital a single holding represents - the weight that decides how much any given move actually matters to you.

Lessons that explain it

• Write the decision down before you know how it turns out — A decision record captures what you decided, why, the conditions, the main risks and what would change your mind. It turns each decision into something you can learn from later. (9 min)
• The entry itself: eight lines, five minutes — A template short enough that you will actually use it, and specific enough to be worth reading in three years. Write one by the end of this lesson. (8 min)

All 578 terms in the Investing glossary