For those who are planning to buy stock or get involved with the stock market, it is important prior to jumping in that you have an investors exit strategy.

Why an exit strategy is important?

Exiting from your profitable stocks investment when you hit the desire profit percentage is where you see the real cash returning back to your bank account.

Of course, we all think we're going to make tons of money in the stock market. Nothing is more enticing than watching the stock market ticker on a good day and thinking of all those people celebrating at their earnings by sitting back and doing nothing.

It is like gambling, highly addictive, and we all think we've got the right plan to succeed. But even the best investors make bad decisions, and it is having a proper exit strategy that can help you from losing a small bit of money, to losing it all.

One thing that many investors have a hard time with is understanding when to let go. When you've invested time and money into a stock, you may often see its decline, and because you have an affinity for it, just assume it is going to recover. If you do not have a financial advisor to help you determine when you must sell and get out, you need to be able to take feelings out of the decision and be able to sell.

The best exit strategy would be to get out when you gains have peaked. Naturally, no one can predict when that is. If we could, no one would have lost 30, 40, or 50 percent of their portfolios over the last few years. People got greedy, and stopped paying attention. We were all making money and it seemed like it would stay that way.

If we were paying attention though, those of us who had a lot of money in risky stocks who had made a ton of money on them would have realized the market couldn't stay that way forever, and would have comfortably exited, happy with their gains. That is the importance of an exit strategy, to understand good decision making, to not be greedy, and to appreciate what you have made.

As you age and have less time to make your money back, you absolutely must get the risk factor down to a bare minimum. We've all heard the stories of people on the verge of retirement, some in their 70's, who still had money invested in extremely risky portfolios.

As you close in on the time when you actually need your investment money, it should be in a safe place where the market can't devastate it. Planning ahead and utilizing a proper timeframe is the key to having an investors exit strategy.

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