We’re taught from birth that perseverance will pay off. However, sometimes we need to learn when the ship has sank. Knowing when to bail can make you a winner or loser in the world of finance. I read a post by another blogger (that I can’t remember the link to right now or else I would share it!) about how people are quick to hold onto a losing stock, but let go of winners.

This can be applied to many things in life. We’ve been taught forever that our hard work will pay our bills, but a lot of the time smart work is what we should be focusing on.

So, you picked a loser. Sucks for you, but it’s not the end of the world. The important thing to differentiate is whether this is a temporary set back or a long term burden. Many times stocks are down on bad news which will weigh on them for a while, but hanging out will pay off in the long run.

While this may be true; you must ask yourself. How long am I willing to wait? And what opportunities am I missing out on while I do so?

I recently dumped a loser stock with the rationale that waiting ‘could’ bring the stock back up, and I could recoup my losses. However, that was unlikely. At least in the anywhere nearby foreseeable future. I could hold onto that stock stubbornly for the next five years waiting for it to amount to something or do as I did, and tell it to take a hike.

The biggest loss in my mind was time. I was off schedule for earnings. I won’t recoup this by hanging on to a sinking ship. Instead I chose to swallow my loses, and re-invest in better options. This will most likely recoup my losses long before my D student stock decides to start being useful to me.

I have held on to securities in the past that were on a down turn to have them shoot back up, but again this is on a case by case basis. Should you always dump a stock for taking a nose dive? No. Should you always evaluate your situation? Definitely.

I spend a lot of time analyzing different stocks, and deciding which are the best choices for me. Of course you can’t win all the time right? Sooner or later a real stinker will come your way. Which is what’s so important about one of my latest posts on diversification.

Sometimes you make a bad decision, but there’s always tomorrow. Hanging on to yesterday’s mistakes will not get you anywhere. Though hanging on *has* been beneficial before in some cases.

Happy trading. : )

Originally posted 2010-08-22 18:00:22. Republished by Blog Post Promoter