Question:
I had the joy of being introduced to junior (read: speculative) Australasian oil and gas stocks, and at one stage was sitting on a nice 40% gain across my portfolio. As already mentioned in a question, I had a guru advisor who believed you buy and hold on the fundamentals and he didn’t believe in stop losses etc. Through a marvelous combination of stupidity, ignorance, and ignoring my own instincts, I’m sitting on a splendid 82% loss! When in such a bad position, my feeling is to sit it out and wait for them to rise – as selling now is just too painful. Any suggestions? And yes, I am pretty embarrassed to say the least!
Kiwi from Oopsville
Answer:
Kiwi, thanks for writing in again. I’m sorry about the circumstances you describe, but if it makes you feel any better, many, many, many traders, including myself, have felt the emotion of embarrassment over positions we have taken, and, if honest, the reasoning (or lack of) we used to take those positions.
I can’t speak specifically to your position, as I know nothing about your capital investment, your total capital account, or the specific nature of the investment itself. What I can do is offer general advice about your limited options and point out what you might learn from this “mistake.”
If liquidating your position now can raise enough capital to reinvest in an overall market that is rising, you might consider this, rather than let your account head toward zero. My guess is you are reluctant to make this move because you believe (hope) the market will eventually return some of your loss. Look to the fundamentals of the investment to help you make this decision. If the remaining value of your investment is so low you gain little from liquidating, then suck it up, sit tight, and hope for the best, as you seem inclined to do.
Letting go of a loss can be clarifying, if you see the “bad choice” as an opportunity. Yes, I said opportunity. One stabilizing lesson I have learned in life is that sometimes the things that hurt us often teach us as well. In your case, it sounds as if you learned that taking positions without an exit strategy can be costly. As well, you seem to understand that the ultimate fault for your position lies with you and you only. This is your opportunity. From this point on, take the reins of your investments, since you will end up with the blame anyway. Look for advice, but do not abdicate control over how your money is invested. Stay on top of things with knowledge, awareness, and confidence, and you might never have to admit to embarrassment again, well for awhile anyway …
Trade in the day; invest in your life …
