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The ideal is to sell the losers and let the winners ride. Of course, it’s quite tough to know which suffering stocks will turn around and which won’t. From analysis, the investors tend to sell winners early and hold losers longer. This demonstrates that investors prefer to sell winning positions before selling losing positions. We typically only sell a winning position if the stock price has risen to our set target, or other factors like meeting the risk tolerance, investment objective and also the amount of investment capital. This strategy - buying winners and sell losers has shown strong excess returns for investors.
For clearer explanation, when we sell a position and make a profit, it proves that our first decision to buy the stock was correct. However, if one of our stocks has an unrealized loss or no gain, selling that position would demonstrate that we made a poor decision in selecting that stock. This explains why it is easier to sell a winner and why we tend to hold onto losers longer. So, in order to become better investors, we must either teach ourselves or trick ourselves into making better decisions.
How can you keep the investment better? Below are some insights:
- Keeping emotional decisions to a minimum when investing will result in improved overall performance. Don’t make harsh decisions.
- Be disciplined in selling under-performing investments and continuing to ride winners for those continue performing.
- All investments must be based on fundamental financial data to help you make decisions.
- Buy low and sell high, need to learn patience and sometimes will need to hold for long term.
- Remember to DYODD (Do your own due diligence) when making any kind of investment.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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whqqq : Yes, I agree with you. Not only refer to others' opinions, but also take the initiative to do due diligence