This is where your finance takes place

You looked at her while she was looking at you. You smile; she smiles back… someone is blushing. There is that rush in your blood, your hearth is pumping more than ever. If it could also happen when you are about to lose your squash game! You ask her out, she accepts. Everything is so perfect that you get married after a year.

The morning right after your wedding day, she’s a real… and it’s getting worst and worst month after month. She might even cheat on you!!

 

 

Are you going to keep her and try to find the (small) positive points in that story? Are you going to stay with her and hang unto your memories of what was “the good time”. Are you going to live that life thinking that since it was great at the beginning, it will all settle and she will come back to what she used to be?

Well this is exactly what is going one for most people when they buy stocks on the market. They look at the company financial statements, look at its growth and accounting ratios, they hear good stuff about this stock on CNN money and they decided to do some trading. Unfortunately, they forget that a trade on the market is not like signing a wedding contract. Your stock doesn’t owe you anything.

You might have made a good decision by trading that stock. The company may go up as expected and show positive results or pay a high dividend. After a while, it is very possible that you are making a good investment return on this transaction. However, in order to fully appreciate your trading experience, you need to sell your stock and cash your profit!

If you fall in love with your portfolio, you will never be able to sell anything from it. Then, you will ultimately lose money as the stock will not rise for ever (it will happen even with RIM!). Falling in love will create fake ideas, false hope and your delusion will destroy your investment strategy.

You need to determine an investment strategy and stick to it. Forget about those “I’m selling once I got 20% return”, that is completely stupid. Sell when you have a real reason: some financial ratios are slowing down, the industry is having problems and so your company, there is a change in the higher management staff. Those are real reasons to sell a stock. Basically, if you think that your stock lost the key reason why you bought it; it’s time to clean up your investment account with a few trades!

On the other side, if you keep trying and you keep faith in your investments, you will live a sorry and poor investor life!

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