Last week another sharp selloff hit portfolios with a tech mini selloff. What’s to come? Multiple theories, but with the presidential election approaching on November 3rd, you can expect increased volatility.
Have these questions ever crossed your mind:
- If the stock has gone up, will it go up more? or is this the time to sell?
- If the stock has gone down, will it slide more or turn around and go up?
- Should I take a small loss now?
- Could I swallow a huge loss or should I wait for a rebound?
- Now that it is rebounding, should I hold until I’m even?
- Now that I’m even, should I aim for a gain?
When you suspect the market to be high or on the tail of long bull runs, remember this term – realize the gain.
Stock portfolios are only digital equity valuations of potential capital, which is not real money until you decide to trigger the sale of stock units. Let’s review the psychology involved.
Buying stock is carried out with hope and excitement, typically coupled with an adrenaline rush.
Selling stock is intimidating and typically coupled with uncertainty.
That’s why its easier to keep it in the market with the HOPE (which feels good) that your gain will continue or your loss will reverse itself, rather than face the intimidation (which doesn’t feel good) of thinking you should have held onto the stock longer, sold sooner, have taken a smaller loss – all negative sentiment.
Consider thinking this way instead:
Selling is liberating!
Not only do you realize a gain after a bull run (rather than giving back what you could have earned), it enables you to have cash to buy that same stock on a dip, or another stock, at a better price. Understand that once you act, you SHALL NOT BROOD about what happens next. Trust that you acted in good judgement and realized the gain.