Face up to losses
The tendency to retain a losing position may cost an investor dearly.
If you make an investment and it drops in value your reaction is likely to be to resist selling until it at least returns to the purchase cost. Humans are poor at coping with errors and so our approach tends to be to ‘anchor’ ourselves at the price we originally paid. We persuade ourselves that we will eventually be proved right.
There is nothing shameful about making a mistake, professional investors do it all the time. It’s how you deal with it that counts. The pros try to look at all their holdings dispassionately with no regard at all to whether they are standing at a profit or loss (unless there is tax payable on disposal).
EQ tip: ask yourself: would I buy this investment today? If the answer is ‘No’ then you probably should not continue to hold.
I have a question...
Some Free EQ Guides
Coming into money isn’t something that happens often. Before you commit yourself to spending, investing, giving gifts or even giving up your job, here are some tips on how to make your windfall work for you in the long run.
EQ is a Chartered Financial Planning firm able to offer a wide range of services to private clients including tax optimisation, retirement income planning and estate planning.
The April 2015 Budget saw the most radical changes to the pensions landscape for a generation, but the new flexibility on offer is only available to personal pension holders. Members of final salary schemes can only access the new rules by transferring to a personal pension.
This guide explains how planning ahead of time can provide for – and in most cases reduce – the amount of tax that is ultimately due on your estate.
When it comes to money, it is fairly easy to get so entangled in the jargon that you lose sight of basic sound financial planning principles. This guide provides some pointers on important steps to take, and a few pitfalls to avoid, along the road to a healthy financial future.