A stock is not a date, you don’t need to stay with the one that got you here

ID-10036093Any given stock is going to see its price increase or decrease as the markets ebb and flow. This is a reality of the market and an investor needs to understand that the investment is not going to linearly rise every day.

Sometimes this movement is tied to the general market. If the Dow Jones Industrial Average or NASDAQ drops a point or two, then it is not unusual for even the best of companies to drop. This general drop has nothing to do with the quality of the company but just the general reaction of many investors. An individual investor need not panic if the general market moves down for a couple days. Unless very bad news has affected the general economy, there is a high likelihood of a general increase to offset the down market.

There are times though when a piece of bad news that is specific to the company or in the company’s industry will affect a stock adversely. In this case, the investor may see the stock price drop many points over the course of a few days. This movement may happen even when the general market is enjoying a bull market. This is a time when the investor needs consider remedies to recover.

If the stock was a professional sports team instead and they just suffered a major loss, the fan would remain loyal and count on the team to overcome adversity and recover. If the stock was your date for the major art gala, then politeness would mean that you stayed with your date even if you just had a disagreement. However, you do not owe loyalty to the stock. The stock isn’t your significant other that requires you to “work it out.” Instead, your stock is a relatively short term business relationship, and there is simply no need to be loyal in this situation.

If you are significantly down on a given investment, you need to ask yourself some very hard questions. Namely, is this the stock that will get you back to even? Are you sure? Do you really think that this is just a short-term set-back and all of the investors in the world are going to see the error of their ways and rush back in? Also, in the general market, is there another stock that is seeing amazing growth that can get you back to even more quickly?

You owe it to yourself to forget the price you bought the stock. You need to evaluate if the stock is going in the right direction from this point forward. If you knew everything when you first bought that you know now, would you still buy this stock rather than that other high-flying stock? That stock went up while your pick went down!

The Grow on Other People's Money philosophy of my book, The Confident Investor, teaches you how to get out of stocks going the wrong direction. It teaches you to ride the stocks that are experiencing a bull market and ignore the ones in a short-term bear market.  You can purchase my book wherever books are sold such as AmazonBarnes and Noble, and Books A Million. It is available in e-book formats for NookKindle, and iPad.

There is no loyalty in the stock market. If the current pick is bad, then fix it. Sell your holdings and put the principal into a better vehicle. It doesn’t matter where the stock has been, it only matters where the stock is going. Make sure that you have the right date at the end of the day because it doesn’t matter what date you brought to the party.

Image courtesy of nuttakit / FreeDigitalPhotos.net

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