First Rule Of Investing:Cutting Losses(6)

Q: How persistent have you had to be at times?


O’Neil:

I once had a string of 10 stocks that I cut losses on.

But the very next one emerged just as the market came out of a correction (downtrend) and more than tripled in price.

I’ve often thought: “What would have happened if I had gotten discouraged and quit because the previous 10 stocks didn’t work?”

The tricky part is getting rid of the emotion attached to making decisions, like cutting losses.

It doesn’t feel comfortable to sell something you may have purchased only a few weeks ago because it’s now down 8% below your cost. Emotions take over.

We try to defend our original decision to buy and justify holding the stock.

But you can’t go through life looking in the rear-view mirror.

You can get yourself in a lot of trouble with the “could’ves,” “would’ves” and “should’ves.”

When you bought the stock, that was last week or last month — not today.

Today is a whole different situation, and you’ve got to protect yourself from serious losses — which could happen to anyone — so you can still invest tomorrow.



Investor's Business Daily