There’s a famous saying that basically states that you have
to know when to “cut your losses.” That means that there does, sometimes, come
a time when you have to own up to a less than perfect choice and the
consequences that go along with that choice. Plus, sometimes, things just don’t
go the way they were expected to, and you have to be willing to give up, even
if it goes against your nature. These rules apply strongly to investments. No
matter how careful of an investor you are, you are going to undoubtedly have
some poor performers or downright losers in your portfolio, and it’s important
to know when to cut them loose.
Letting go of those losing investments doesn’t always mean
losing money, however. In fact, sometimes it means just the opposite. You can
often sell poor stocks for a nice tax break or a capital gain. Plus, just
because you’ve given up on a particular investment doesn’t mean everybody else
has. Those stocks and other investments that aren’t doing you any good may be
just what some other buyer is looking for, so don’t hesitate to sell if a
particular investment just isn’t getting you anywhere.
Of course, if your portfolio is filling up with lots of
losers, instead of just one or two, then you’ve got bigger problems on your
hands. To avoid ending up with a bunch of losing investments in the first
place, invest smart. Call on an investment advisor for assistance and mostly
avoid individual stocks and instead go for a diverse mix of exchange traded
funds and mutual funds. With the right guidance, you might find that you don’t
have to worry about cutting your losses because you don’t have any to begin
with.
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