Common Mistake Of Taking Losses

Psychologically, most novice investors made a common mistake after losing heavily on shares investment by falling into the temptation of 'averaging mentality' to buy back more of the same high-risk, high P/E shares or worthless stocks which they losses. This mentality of taking back all their losses are not much different from gambling mentality to make bigger bets. Stock investment is not about gambling. Gambling is short term whereas shares investment is long term.

Nothing is further from the fact, history has told us that even several experience traders took a plunge with getting further into bigger losses and getting into bigger troubles. Have we not heard of that? How much more can it happens to novice or inexperience investors?

Don't lose your 'cool' or discipline by allowing a small loss to turn into a big loser. It's better to minimize losses than compound the problem by making decision based on emotional feelings in an attempt to recover from the original mistake. Novice investors should take the losses as a learning curve to sharpen his/her knowledge and skill and wait when next opportunity arises.

Always remember this tip when taking a loss:

Small losses allow you to remain investing and learning, whereas larger losses can seriously hamper your investment when next opportunity arises.

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