Written by Banudas Athreya on 22 May 2019
October 31, 2008·
Investments are made based on the potential and prospect and not on how low the stock has gone. This theory may work only when you have a well researched portfolio of stocks with the right potential
2. Going by tipsters or broker’s call
Do this only if you cannot afford a trip to Las Vegas for a holiday and you are desperate for the experience. Get the experience fast and quit
3. This is a long term investment
The stock does not become a long term investment if you have lost in the short term. You need to make a realistic and a non emotional call. It is better to cut the losses and look like a fool rather than hold on to it and remove all doubts. Long term investments should be so intended at the time of purchase. If someone says he has a long-term investment be rest assured that he is holding a loss investment
4. Averaging when the market’s decline
This is the most common mistake and even bigger pothole than the “long term investment”. The fact is that you are still at a loss and will continue to average
5. What is the point selling now?
This is a good argument if you are going to get virtually nothing more to lose. But if the amount invested is sizable is e 50-70% of what you invested or exposure is high relative to your total assets do take the spoils. Again keep the potential in mind and do not recklessly hold.
6. Equities are the only option. With the current inflation we are losing money in the
banks and real interest rates are negative
Equity investment is by choice and can never be the only alternative. The loss
of real interest rates may be better in the short term than losing capital.
7. Markets are bouncing back
This is partly due to short covering and running emotions and confusions. Stay out and
do not waste your company time and your money on this.
