The hardest part of investing, in my opinion, is knowing when to let go of a loser. It’s easy to sell a winner. After all, there are gains to realize and victories to lock in. But locking in a loser is admitting loss, a pox of shame upon your household. Such shame may live forever, in infamy, as a tale passed on through the generations of how you lost the family fortune.
Or it might be some piker trade where you lost 3 grand. Either way, losses are hard to close out.
Often times, trades become investments when the trade goes bad. After the trade goes bad, we look for reasons to hold onto the stock. Sometimes we convince ourselves that merely trading the name in the first place would’ve been a ridiculous proposition. After doing all of that hard work and research, we unveil true value in places that no one ever thought of looking.
This is called desperation. More often than not, when we grab for straws, based upon a losing trade, we start over-fitting. In other words, we look for excuses to hold the stock, even buy more, in order to preserve our delicate egos.
After all, we are all genius, a gift to the earth and the stars. How could we be wrong when we are so smart?
If you think about it, this sort of rationale transcends every aspect of living, from marriage, friendships to dead end jobs. People always tell me “the best thing I ever did was divorce so and so.” Or “thank God I quit that job.” But we all fear making that commitment because it means we’ve failed.
Isn’t it better to realize a small loss than a gigantic one? This is common wisdom, not exactly trade secrets. But we keep reading about famous fund managers committing fraud, blowing up billion dollar funds, risking their freedom by trading on insider knowledge. Why? The answer is quite obvious. No one wants to fail, ever.
This mentality has climbed to the top of the capstone. The controlling elite now accept failing as part of the business cycle and allow poor stewards to continue to run good companies into the ground.
I own one stock that is underwater: FRO. Had it went up to $3 after my initial purchases, I would’ve sold it. But since it’s down 17%, I am a long term investor, very prim and proper–interested in the ongoings of the shipping business. I care for shipping in the same way I care for a banana less gorilla jungle. Sometimes I feel like smacking myself in the head with my tea mug for being so stubborn. All of my money losing ventures are the result of pride.
I’ve been blogging on the internets since 2002, one way or another. In the world of finance, I’ve been blogging since 2006. I’ve written more blogs than you could imagine. The pinnacle of iBC was back in the frantic days of 2008-2009. This isn’t exactly a growth industry, as there isn’t anything very innovative about reading the missives from a group of traders. Twitter is to blogs what the internet is to newspapers.
All of my time and energy have gone into making iBankCoin successful. But my opinion of success might differ greatly from yours. Some are happy with a little recognition and influence. Others only want to make money. My opinion of success is fairly straight forward: is the endeavor creating value? If so, is the time spent to create this value worthwhile?
Mrs.Fly often queries “how long will you blog?”
Ideally, I’d like to pass on the torch at some point, crowning the next “Fly” in the same manner as the catholic church selects a new pope, black smoke and all. Perhaps in 500 years, your great, great, great, great grandchildren will be reading the insane missives of King Fly the XIII. Or, maybe I’m just over-fitting again.
http://www.youtube.com/watch?v=eCre5lvlEcY
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