“Should I sell my stock?” That’s a question I hear often.
Here’s an e-mail I recently received on this very question:
Should I sell my stock & bonds? I’ve lost $7,000 lost in 10 years. That’s half the amount I invested. Should I buy gold with the $7,000?
How would you respond? I told this person I have no idea. Here’s why.
I manage money with mutual funds and exchange traded funds and I try to use investment strategies that make sense. I don’t make any decision based on my predictions about the future. I have an investment strategy and I stick to it. It’s not perfect but it takes the emotion out of the equation.
“Should I sell my stock?” is a question that can’t be answered unless you first answer the question, “Why did you buy the stock?” You see, I believe that you should only invest your money using a strategy. Your strategy isn’t going to work perfectly, but you should never invest your money based on your gut feeling. Your strategy could be far different than mine and that’s OK. But you must have a strategy that guides your investment decisions.
Those are my general feelings. Now…let’s talk about this particular investor. Specifically, this investor seems to be a speculator and acting out of desperation. My guess is she wants to plunk her money into gold in order to quickly make up for the losses she suffered. That’s now how to make money in gold if you ask me. Here’s a tip.
The market doesn’t care about the money you lost.
If you try to speculate in order to make up for the losses you suffered as a result of your speculation, don’t expect a positive outcome.
So my best advice is for this investor to take a time-out. Get clear on her strategy. Then, and only then, make investment decisions if, and only if, they are consistent with your long-term strategy.
What advice would you give this reader? Is it OK to take a flyer?