The last few months can really make investing seem like a losing proposition. While reading the message boards for a particular stock today I saw that one gent asked for honest advice about selling versus hanging in there on a stock that was dropping day after day. He was down over 50% in the last two months. The reply:
“Well, look at it this way. One insider alone owns 20 million shares and isn’t selling! He has seen his portfolio drop close to 1.5 billion in the last 3 months. If someone tells you they would give you 50 cents on the dollar for your home would you give it to him? The only difference is that you get to see a quote on your stock. Sit back and be an investor…”
Interesting analogy, and it may be very good advice. Or it may not. Personally, my home isn’t an investment, and I don’t “live in my stocks” (even if it feels like it sometimes). What really matters is the context of that “investor’s” life and investing situation. All things being equal, if he doesn’t need the money in the next 5-10 years, and he’s chosen a solid, profitable company that’s just out of favor right now, and he’s okay with sitting on it for the long term, then yes- maybe he should stop checking his stock quotes every day and just ride out this downturn.
But maybe he “invested” money that he really needs over the short term. Maybe he’s so worried because he has been making short-term bets with money he doesn’t have. Maybe he really shouldn’t be investing in growth stocks without professional advice because he simply doesn’t have enough knowledge. Maybe his risk tolerance just isn’t suited for investing in stocks at this point and he worries too much to sleep well at night. Maybe, maybe, maybe…
You’ve got to decide where you stand. And for how long. Sometimes selling is the only thing that brings your sanity back. Even if it is the wrong decision. But sometimes you’ve got to say “What the hell…” and just leave things be for a year or two.
Most of the time I try to “sit back and be an investor.” Sometimes it’s pretty damn hard to do.
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