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Holding Loser Investments and Stocks
Getting over the emotional factor of investing is one of the toughest tasks for many investors of stocks. Many investors buy a loser stock and then watch as the stock's value goes lower and lower. Some are tempted to buy more stock and "average out". Some just hold until the stock becomes worthless. This happens because it's tough to take an objective look at your investments, especially investments that you have lost money on, but you have to try to step back and make the wise decision.
One way to take an objective view is to look at the value of the stock and what the stock is trading at today. Do not consider the past in this analysis. Pretend the past has nothing to do with the current value of the stock. Now ask yourself, would you buy the stock at this price today? If not, you need to consider selling the stock. Don't hang on to a stock just because of the fact that selling it would be at a loss. Only hold a stock if it's a good investment today. The same holds true for investing in mutual funds and ETFs. If the fund is a dud, you need to consider dumping it for a better performing mutual fund or ETF.
It can also be tough to sell stock or investments in a company you work for. You have your own hard work and time invested into the company. You probably know more about the company and the industry than most. Plus you no doubt have emotional ties to the company. So take a step back and make sure that you are invested for the right reasons.
Getting the emotional factor out of the way when investing in stocks is one of the reasons many people use a professional financial advisor. Professional financial advisors can make objective investment decisions and can get your portfolio balanced and can get rid of those loser stocks, mutual funds, and ETFs. You should always keep a close eye on your advisor as well. Making sure they aren't getting emotionally involved in sticking with a bad investment. Even the pros can make mistakes.
There is actually an upside to selling a stock or fund for a loss in that you can then write off all or a portion of your loss in your income tax. Be sure to double check with your tax advisor to make sure you can write off any capital
loss ahead of time as there are specific IRS rules around selling stock.
Note: always consult your professional financial advisor. The advice on this page is just opinion and you should consult a professional before making any financial decisions.
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