Take Your Losses Quickly and Your Profits Slowly

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Take Your Losses Quickly and Your Profits Slowly

There is an old investment saying that the first loss in the market is the smallest loss. In my view, the way to make investment decisions is to take your losses quickly and your profits slowly. Yet most investors get emo-Even after all this explanation, most investors will still ask, "Shouldn't we sit with stocks rather than selling and taking a loss? How about unusual situations where some bad news suddenly hits and causes price declines? Does this loss-cutting procedure apply all the time, or are there exceptions— like a company has a good, new product?" It doesn't change the situation one bit. You must protect your hard-earned pool of capital.

Letting your losses run is the most serious mistake made by almost all investors! You positively must accept that mistakes in either timing or selection of stocks are going to be made by even the most professional investors. In fact, I would go so far as to say if you aren't willing to cut short and take your losses, then you probably should not buy stocks. Would you drive your car down the street without brakes?