Take Your Loss

We sometimes carry the burden from the past. Just dump it and start over again. It gives you enough energy to catch up.

This is what you can learn from (private) investments. Whether you have just started or you are an experienced trader; taking your loss is not that simple.

First. Your portfolio is doing ok from the start. Then comes the moment where one or more investments in portfolio don’t act the way you want them to act (as if these stock have their own life). They have a significant under-performance and there is no hope for better times. All stock go down sometimes, but especially after signals like a profit warning a stock can really fall. There are companies where a series of profit warnings continue for years. For those, you have enough time to anticipate a sell. Enough time to think; I should get rid of this, but something holds you from doing so. The feeling; I have not made a mistake. And if I sell the investment, I will feel what I’ve lost. And this feeling is real. Or is it not?

In fact, it is not. The value of your portfolio is already in decline. The only thing you do when selling the wrong stock is taking notice that there is a bunch of other opportunities. Other stock you can ´jump in´.

Acknowledging that you are indeed wrong is giving you relieve. We all make mistakes, so why make a point out of it? Still, the lessons from investing learn that we keep carrying the burdens with us. And in business it is not really different.

Maybe you know the examples in your organization. Something has been built and appears to be less useful as expected. It keeps new applications from development. Like the weeds that keeps the young plant between them from flourishing. But we leave the situation as it is. Is it resistance to change? Whatever it’s origin, it is a real pity.

Try to take your loss for once and experience how relieving it can be. It gives you enough energy to catch-up.