DD Support Board and Research Team

[DrContango]

Thanks, Bar.

We had been discussing the conundrum of pruning portfolio roses while allowing weeds to grow. Of course, most individual investors do just that: sell winners and hold on to losers until they reverse to break even.

Behavioural psychologists have verified these observations in studies of risk aversion but with the extraordinary exception being contestants on game shows such as “Let’s Make a Deal”. Specifically, they have quantified that the “pain of economic loss” can exceed “joy of economic gain”

(The “Monte Hall Problem” is quite different and well worth a read:
https://betterexplained.com/articles/understanding-the-monty-hall-problem/)

OTOH holding onto losers is the result of failing to understand the economic concept of “sunk cost”.
Try explaining that to an iHubber, especially those who believe that a loss isn’t a loss until the stock is sold.

So, Bar, today was frustrating. A weed that I discarded in 2012 blossomed today: NUAN

I bought a bunch of NUAN in 1998 for <$2/share. I sold in 2012 in the low 20s for a nifty 10 bagger.
The price dropped into the teens until last year when the stock price began growing exponentially.
It was 15 bucks just 6 months ago...

Actually, I made the correct choice 9 years ago since ROI since then has been just average at best (~10% even with the 6 month pop) but I lose boasting rights of holding onto a 26 bagger!




https://finance.yahoo.com/news/microsoft-nuance-deal-health-care-golden-ticket-195753997.html


But since I’ve owned MSFT forever, I’ll own Nuance again...

Cheers,

Doc