I'll bet with almost anyone that has stocks or mutual funds in his portfolio that he has losers, but he won't sell them because he "likes them" or some similar excuse. This is the philosophy of a loser.
You cannot become emotionally involved with anything you have bought whether it is stocks, mutual funds, collectibles, real estate, etc. etc. When you see the value of these things heading down it is time to try to salvage some of your money even if you have to take a loss.
I have seen people hang on to a piece of land (or a stock) for years just so they could get out "even". Believe me "even" is not even. Suppose you paid $20,000 for the land and it took you 8 years to find someone willing to buy it for $20,000. If you could have sold it for $15,000 and put the money in a money market account at 6% for 8 years you would now have more than the original $20,000 ($20,495). When you invest money in anything you cannot afford to have emotional ties to it. You must be willing to sell when the time comes. Most people don't want to sell for two reasons. They won't take a loss; however, the main reason is psychological - they don't want to admit they were wrong. When I was a broker I would watch people trade. Almost none of them were trading to make money although that was what they said. They were trading to find out how much pain they could stand from losing. They were trading for emotional reasons.
The difference between professional traders and a non-professional investor is the ability to divorce themselves from the emotions of the trade. Win, lose or draw the pro knows the risk and is willing to take that loss quickly if it should occur.
Emotional involvement in investing is one of the best ways I know of to lose money. You must be able to look dispassionately at your stocks, bonds and mutual funds and be able to sell them when they turn negative. Negative does not mean go to a loss. It may mean they are no longer making a good return every year with your money and it is time to move to some other stock or fund. You might have a stock that has doubled since you bought it, but that was 2 years ago and it has done nothing since then. Time to sell. Look at your annual ROI (return on investment) of each individual issue to determine if your money is doing better than the overall market or whatever your personal criteria might be.
Many years ago I heard how they caught monkeys. The hunters would drill a hole in a coconut shell just small enough so the monkey could fit his open hand through the hole. It was tied to a tree with a strong cord. Inside there was fruit and sugar. The monkey put his hand in, grasped the goodies, but could not get his closed fist out. He would not even let go when the hunter came to capture him. Unfortunately, there are many investors grasping at losing positions. Isn't time to let go of some of those stocks you have been holding because you "like" them?
Let go of those emotional ties. You will make more money.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
The Winter Games for the Olympics are coming up soon... Read More
I receive emails from Morningstar. This company provides statistics and... Read More
The big bad bear is stirring again. So far he... Read More
Buy high and sell low -- It's not a typo.Millions... Read More
The trash business in its efforts to cook their books... Read More
Question: How does it get better when it gets worse?Last... Read More
The bulls and bears of the stock market are both... Read More
If you are going to be a winner in the... Read More
Its dinnertime and the phone rings. It's Joe Noname with... Read More
How do you invest? What do you really pay? At... Read More
Every broker and financial planner will tell you that you... Read More
When you invest in the stock market for ever-increasing cash... Read More
As an investor you will want to check out any... Read More
Hedge current portfolio positions and gain access to capital resources... Read More
It looks like we have now entered a new bull... Read More
AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
As I said in Part I everyone in the insane... Read More
Everyone who invests in the stock market wants to be... Read More
During our travel down life's path we come to many... Read More
I feel that an investment strategy in the stock market... Read More
Mutual funds were created with the idea that one person... Read More
What are you thinking when it comes to your no... Read More
I am taking the time to help others learn the... Read More
The Shadow knows. Remember him? It seems a shadow has... Read More
The trash business in its efforts to cook their books... Read More
Any online investor / trader seeks an excellent off or... Read More
Maximizing a stock market investmentThere are several factors an investor... Read More
I continually hear from economists, talking heads, other market letter... Read More
You must take the time once a month to review... Read More
Humpty Dumpty had a great fall and all the King's... Read More
The following are a list of nine things you want... Read More
So you're started trading, you bought some positions with your... Read More
What account size do I need?How much money can I... Read More
If you have been watching the stock market at all... Read More
After the publication of the first part of this two... Read More
Success in small cap & micro cap stock trading like... Read More
With the internet such a huge part of our daily... Read More
Peter is a professional trader, Paul is not. Peter has... Read More
What is the Series 7 Exam? If you... Read More
Have you seen all those big full page ads for... Read More
This is a rather simple strategy with which I am... Read More
If you have been dealing with mutual funds for any... Read More
In 1960 an engineer working for a watch company in... Read More
IT'S REMINISCENT OF THE OLD children's tale about an old... Read More
Ever jumped out of an airplane? It's OK if you... Read More
The stock market can present you with a lot of... Read More
Wouldn't it be nice if you were only in the... Read More
You should ignore analysts on TV, the radio, the newspaper... Read More
How is it possible that trash Companies are posting less... Read More
Stocks & Mutual Fund |