To hold bags (losses) or not? It's not a loss until I sell right?
I was just on a mining board where I lost money riding a stock down. (Please dont ask how much because it was to much. Fell in love with the story of possibilites and didnt stick to my investment rules), anyway I was reading some messages and it made me think about how people think when they are on the wrong side of a trade. We all have been there. XyZA starts running and is all the talk of all the boards. We chase the stock up because the news, story, possibilites are HUGE and it's is just around the corner. But the story takes longer to play out and the stock begins to slowly lose it's following and slowly the bottom starts eroding away. Next thing you know you is your 10%, 20%, 50% or more down. BUT IT NOT A LOST UNTIL I SELL RIGHT OR IT WILL COME BACK IN SIX TO TWELVE MONTHS!
The answer is YES, it's a loss. It's a loss of what that money could have been making, or producing during the time of the stock sliding back in price and then recovering. Or it could be a loss that never comes back.
Lets look at a couple of cases and then you can make up your own mind.
1) 10,000 investment in your rags to riches stock. It slowly, and sometimes quickly, goes down past your mental stop to 10%, 20% 50% but luckly it starts to come back and in six months or twelve it back to where it was. Your investment has made you 0%, zero, zippo. Some people would call it DEAD money!
2) 10,000 that lost 10% and your out lost $1,000. If that 10,000 loses 20% is 2,000 and 50% is 5,000. But your telling yourself, I havent lost that because I will wait till it comes back! If you would have cut your loss at 1,000, you would have 9,000 to invest. If you took 9,000 you have because you took a quick exit and started to compound that at 5% monthly, (buy one stock and sell it at a 5% gain, one time a month) it would/could be 12,060 in six months or 16,162 in twelve. That's a 34% spread in six months and 79% spread over 12 months. THATS LOST INCOME! If you let that loss go to 20% the spread is now 50% for six months and 102% for twelve months. And heaven forbid you find yourself down 50% it even worse. 141% for for six months and 223% on twelve months.
3) I chased my homerun, favorite stock and invested $10,000,(10,000@$1.00 a share is 10,000 shares). My timing was bad and now I cashed out with a 10% loss and have 9,000 remaining. I watch the stock continue down to a new base thats 20% lower than my original and 10% from my cash out point. $1.00 - 20% makes the stock $.80. Take my 9,000/.80 and I have 11,250 shares or 1,250 (12%) more than my original investment. If it rises to .90, my original cash out point, I made my loss 1,000 back and when it back to a dollar I am up 25%. Oh, one thing to keep in mind is if/while my favorite is going down, I took that money and invested it for a small 5% compounded, see example above, maybe I have even more to put in the well.
Now was there a loss? I have only been around ATM a short time but I think I understand message: TAKE LOSSES QUICKLY. LIVE TO PLAY ANOTHER DAY!
Just my humble opion.
