Quote:
Originally Posted by Tyga11
I am officially a 'bag holder.' I can't sell now however. Holding on...oh well. You live & you learn
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My favorite Warren Buffet quote - “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.”
That is, of course, unachievable, overly simplistic, and everyone, including WB, has lost money; it's unavoidable if you're investing. BUT, what it does mean, in practice, is that you have to very carefully husband your capital. So, if you're going to lose, lose a little, not a lot, and certainly not everything. And as long as you still have something, you CAN sell, no matter how painful.
I learned that the hard way myself. Now, I keep three things in mind when I invest:
- Decide beforehand not just how much you expect to gain, but how much you're willing to lose on an individual investment. If it happens, get out. Better to lose 5% than 20%, or worse. You can do that using stop loss orders on stocks, for example, so you don't even need to pay very close attention to make sure it happens.
- Use protection. By using options on broad-based ETFs (think QQQ, SPY, etc.), for example, you can buy insurance against a broad-based downturn like we've seen this year. You can buy put options for pretty cheap, which can help minimize your loses or even make you some money in a bad market.
- If the reason you bought a stock - a market advantage, great new product, secular growth, etc. - changes, don't sit there and watch your gains slowly bleed away. Sell. Nvidia, for example. I bought that years ago because they had they best graphics engine and crypto miners needed them. Recently, though, that's shifted. ETH is moving away from proof-of-work, which requires mining hardware, to proof-of-stake, which does not. Poof, there goes billions of potential sales for Nvidia. When I found out about it, I sold without a second thought.
Not sure if that's useful, but I've been in the market 40 years, have learned a few things along the way, and thought I'd share.