11 Apr 2009

 

Are you currently to consider selling all your investments because you cannot bear the emotional torture of the losses and the possibility of more losses should this only be a bear market rally?

Any way you think of it, holding shares at the moment is a lower risk than what it was before the decline. As lower prices equals lower valuation compared to profits and asset value.

I am however not referring to highly leveraged or low quality businesses or both but to high quality business with low debt levels.

I can imagine with a probability of 60% maybe even 70% that the markets will be higher in three to five years than now.

I can however not guarantee it!

What is the answer then? Sell or hold?

There is unfortunately no correct answer. And I am not trying to weasel out of the question.

Most importantly, there is no use in holding any investment that causes you to lose sleep! Should this be case I recommend selling investments to the point that that you at least get a good nights rest or stop excessively worrying.

 

How to determine what investments to sell?

As objectively as possible (by an objective friend or fellow investor) evaluate the investments and their merits at the price they are currently trading at.

This is very important.

Do not look at the price you paid for the investment! It is irrelevant to the decision of holding the investment or selling from here onwards.

Should the decision be to sell the investment them sell and move on. Realise the loss with the knowledge that better opportunities can be had in other investments.

 

Steps to take:

  • Look at your current investments

  • Identify what positions are causing you the most concern

  • Evaluate the merits of these investment at the current price ignoring the purchase price

  • Ask an independent third person for his assessment of the investments

  • Have the courage to sell the position should your and/or the independent evaluation advise it

  • Start looking at new investment possibilities or just enjoy the freedom of less worry

  • Remember that investing is a journey not a sprint and the loss you realised today is only a small point on your investment journey

 

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