This is a great read. I like to read, not much to sell with this cold weather.
http://www.briefing.com/investor/learning-cen...ose-money/
Paper Loss
Perhaps the most common form of loss is "paper loss," or unrealized losses. "I haven't lost anything until I sell," is the mantra most people quote when faced with paper losses.
The problem with paper loss is that they force most people into denial. Rather than coming up with a new reason to hold the stock, at its lower price, they start hoping it will rise.
What paper losses should really do is force you into a reexamination of why you own a stock. There are only three possible decisions when you reexamine a position with paper losses.
•The original reason you bought the stock is unchanged. Buying more might be appropriate.
•The original reason you bought the stock has been proven wrong or looks less likely. Selling should be considered.
•The new valuation of the company is appropriate for the new situation. Hold the position, even with the paper loss. It's equivalent to buying in now, at these prices. But you should consider the opportunity cost loss of alternative investments.
Paper losses should force you to "reexamine your original premise." This assumes, of course, that you had a rational premise for owning the stock in the first place.
Make sure you know why you own a stock. It is the only way to handle paper losses.
Off The High Loss
Many people hold stocks that are higher than their purchase price, but far off the highest price the stock has reached. Some people look at the difference between what they might have, if they sold at the high, and what they have now, as lost money.
If you do this, it is an indication that volatility bothers you. You need to be comfortable with volatile stocks in order to hold them. And this means being comfortable with "off the high losses" during your holding period.
You may never recover "off the high losses."
http://www.briefing.com/investor/learning-cen...ose-money/
Paper Loss
Perhaps the most common form of loss is "paper loss," or unrealized losses. "I haven't lost anything until I sell," is the mantra most people quote when faced with paper losses.
The problem with paper loss is that they force most people into denial. Rather than coming up with a new reason to hold the stock, at its lower price, they start hoping it will rise.
What paper losses should really do is force you into a reexamination of why you own a stock. There are only three possible decisions when you reexamine a position with paper losses.
•The original reason you bought the stock is unchanged. Buying more might be appropriate.
•The original reason you bought the stock has been proven wrong or looks less likely. Selling should be considered.
•The new valuation of the company is appropriate for the new situation. Hold the position, even with the paper loss. It's equivalent to buying in now, at these prices. But you should consider the opportunity cost loss of alternative investments.
Paper losses should force you to "reexamine your original premise." This assumes, of course, that you had a rational premise for owning the stock in the first place.
Make sure you know why you own a stock. It is the only way to handle paper losses.
Off The High Loss
Many people hold stocks that are higher than their purchase price, but far off the highest price the stock has reached. Some people look at the difference between what they might have, if they sold at the high, and what they have now, as lost money.
If you do this, it is an indication that volatility bothers you. You need to be comfortable with volatile stocks in order to hold them. And this means being comfortable with "off the high losses" during your holding period.
You may never recover "off the high losses."
