SHOULD YOU SELL A STOCK AT A LOSS?

Several authors world over had tried to answer the above question convincingly in the past. The major objective of buying stocks, nay any other form of investment product is the profit motive. Since all investors are in the stock market to make increasing profits by buying good stocks and trying to sell them off when they have become overvalued, it will be painful to sell a stock at a loss.

It is an emotion thing, having to accept less that you invested as a return, not forgetting time wasted and all other resources not utilised. Nobody likes losing money. Some people also find it difficult to agree they are wrong, hence they try to hang in there, believing things will change at the next market turn. some do brag to friends and family what a guru they are, not until the stocks they picked start making losses as it will once in a while, that they now remember that the market is no respecter of personality, position, status and qualifications.

So such investors try to stick to their early convictions and carry on as if nothing happened. Defending their actions with flimsy excuses. They fail to notice that a mistake not corrected goes on to multiply its consequences, dragging the whole portfolio down with it. A large percentage of the investors portfolio will be dormant for long. Not smart, not smart at all. Even worse is the practice of shifting such unperforming stock to the long term section of their portfolio. Another mistake as the place you keep an ill timed mistake will not change it from what it still is, a mistake.

Wake up and sanitize your portfolio now. The best action to take is to sell a stick as soon as you notice it was a mistake buying it in the first place. Sell and move the money into more performing stocks and sectors. Take the loss but remember to avoid the mistake that took you into buying the stock in the first place. The money now stands a chance of performing in your new selection, and sometimes wiping away your earlier loss.