21 Jul What to Do When You Suffer Investment Losses

The easiest way to avoid investment losses is by planning thoroughly for investment risk management. The most prudent investment advice to understand that your decision to buy, sell or hold has associated risk.

What you can do as an investment strategy is to accept this risk or to manage it. This is essential to understand because too many people simply hold investments as they can’t decide on a course of action in this tough market situation.

What they don’t realize is that “no decision” is also a decision, because it will maintain the levels of risk in your portfolio. This will be no different from buying the same investment that very day. It’s like a deer caught in the headlights and becoming paralyzed by fear. Meanwhile, the car comes closer to it and might hit the deer.

Therefore, every investor makes a daily decision to accept risk or to manage it. The best way to understand if you are suffering from a portfolio down scenario is to ask yourself whether you would consider having the same portfolio if you didn’t need the money. What would you have done differently? You are asking yourself this because your inaction is the same as buying the portfolio today.

The decision to buy, sell or hold will depend on your answer. If you really see the need to rebuild your portfolio once you start to incur losses, the above logic will remain the same. Selling these assets now would not reverse the loss anyway. Every day, you must analyze your portfolio to determine its value by the market.

Prune your portfolio on a regular basis to remove any deadwood. When you are left with your best assets, plan a new investment strategy to rebuild. Make it a habit to accept or reject risk on a daily basis to keep your portfolio in the pink.

Lastly, never let yourself be emotionally invested in losses because the value today is exactly what a buyer will be willing to play. Don’t let emotional clutter keep you from selling bad stocks.

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