All Common Stocks Arc Speculative

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All Common Stocks Arc Speculative

There is considerable speculation in all common stocks, regardless of their name, quality, or purported blue chip status. Every 50% loss began as a 10% or 20% loss. Having the raw courage to sell and cheerfully take your loss is the only way you can protect yourself against the possibility of greater losses. Decision and action should
be instantaneous and simultaneous. To be a winner, you have to learn to make decisions.

If a stock gets away from you and the loss becomes larger than 10% or 15%, which can occasionally happen to anyone, the stock normally should be sold anyway.

In fact, in my experience the ones that get away from you for larger than normal losses are usually the really awful selections that must be sold. It is wise to remind yourself, "If I let a stock drop 50%, I must make a 100% gain on the next stock just to get even, and how often do I  buy stocks that double?"

It is a dangerous fallacy to assume that because a stock goes down, it has to come back up. Many don't, and some take years to recover. American Telephone and Telegraph hit a high of $75 in 1964 and took 20 years to come back.