“Sure my stock is trading lower. But I haven’t lost money until I sell.”
You’ve probably heard a friend make this statement about one of their favorite stocks. I know dozens of novice investors that embrace this idea.
But when I heard a professional money manager repeating this falsehood on National TV, I couldn’t help myself.
“You’re destroying people’s chance at recovering from this bear market” I muttered.
And while I’m sure the institutional investor meant well, this falsehood could keep you from growing and protecting your wealth in 2023.
Don’t get sucked into this lie!
Stock Prices Matter — Even if You Don’t Sell
Like most believable lies, this statement is based on a reasonable concept.
Investors shouldn’t be distracted by every ebb and flow of the market.
Stocks trade higher and lower on a day-to-day basis. And if you get caught up watching the short-term fluctuations, you’ll probably make some poor decisions.
If you buy ConocoPhillips (COP) — one of the names on my Profit Watch list — and the stock drops by 50-cents per share, it’s not a big deal. You probably didn’t buy it based on the next $0.50 shift in the stock.
But if you bought a speculative tech stock like Zoom Video Communications (ZM) for several hundred dollars — and the stock is now trading below $70 — you most definitely HAVE lost money.
Deciding to stick with the stock until it rebounds is a terrible strategy.
And claiming that “you haven’t lost money until you sell” is the equivalent of sticking your head in the sand and ignoring the truth.
When a stock trades materially lower, it’s the market’s way of saying that you have lost money.
The stock is no longer worth what you paid for it. Regardless of whether you sell or not, the value of your investment is now lower.
Step Back And Consider Your Options
I get frustrated when I hear this statement. But it’s not because I’m claiming the “moral high ground” or because I simply disagree.
I’m frustrated because this statement can cost you money!
When you stick with a losing stock because you don’t want to sell (and realize that loss), it limits your options.
We’ve all done it before. And we ALL have losing positions from time to time.
But smart investors take a different approach.
Instead of refusing to realize a loss, the best investors take a step back and ask a simple question:
“What is the BEST way for me to make my money back?”
In some cases, the losing stock you own may be due for a sharp rebound. If that’s the case, you might want to hold on.
But in many other cases, the stock you own traded lower for a reason!
And now, your best bet is to move your money into a different area of the market — an area that has a better shot of making you a profit.
If you face reality and recognize that you have lost money on your current investment, you’ll have a better shot at figuring out which investments can help you recoup those losses.
Invest Like a Professional in 2023
As we kick off a new year in the market, I hope you’ll take some time to look carefully at each of your investments.
We’re in the middle of a bear market. Which means many of us have positions that are under water.
Ignoring those losses and hoping the stocks trade higher is a mistake.
Instead, ask yourself what you would buy if you had no positions and you were starting with a clean slate.
Chances are, those investments are the ones that will give you the best chance at success in 2023. And moving your wealth into these names gives you a better shot at recovering your losses.
Could you use some help picking out stocks for 2023?
My “Profit Watch” service gives you a list of the top stocks on my radar right now.
And I update this list each week, so the picks are always fresh.
For just $27, you can have access to all the stocks on my watch list, along with a weekly update on what’s working in the market.
I’d love for you to join this community and stay on top of the best stocks that can help you grow your wealth in 2023.
Whether you use my watch list or set up your own, please be honest with yourself.
Don’t believe the “I haven’t lost money” lie. Instead, focus on what investments can truly help you succeed in 2023.
Here’s to growing and protecting your wealth!