As you all know I recently sold nearly all of my entire share portfolio. Amongst them were two stocks that I should have got rid of a lot earlier than I did.
What were my reasons (excuses) for hanging on to these two stocks?
Looking back in hindsight the reasons were hope that they would go upwards again and the unwillingness to accept a loss which had got out of control. Plus also I would not admit that I was wrong in hanging on to them for as long as I did. To make matters worse I was also emotionally attached to them.
I had bought both stocks at nearly their all time highs, only to see them slide backwards just as fast. This was before I used "stop losses." I held onto them hoping and believing that there would be a turnaround but there wasn't.
The loss when I sold was around 50% but I was very fortunate that my other stocks I sold made up some of the loss to a more acceptable level.
The lessons to learn from this experience are:-
1. Don't fall in love with your stocks or get emotionally attached to them.
2. Always employ a stop loss. (See past articles on this.)
3. Don't live in hope that your stocks will rebound back upwards. They might but it could take months even years. You are far better taking your loss while it is still relatively small and investing elsewhere.
It is all too easy to tell yourself that this stock will go upwards again if you only wait a little bit longer. You have to be ruthless and unemotional when it comes to share trading.
Remind your self that this is not a game and we should be serious about it after all we are all doing this to make money not lose it.
So hopefully I have learnt from this costly experience and learnt another lesson and won't get caught again next time. Or will I?
Christopher Strudwick is a keen amateur investor on the Australian Stock Market. Visit his weblog for more free articles and useful information at http://www.asxnewbie.com
Source: www.articlecity.com
