Few small tips to cut equity market losses – Nadeem Moulvi, Director, M.M. Securities
By: Nadeem Moulvi, Director
M.M. Securities Pvt. Limited
Perhaps one of the most enduring investment-related saying is “cut your losses short and let your winners run.” The objective, therefore, is not to avoid losses, but to contain them. Simply put, realizing a capital loss, before it spirals out of hand.
Investors Don’t Like Admitting Their Mistakes
By avoiding selling stock at a loss, investors often think that they are sparing themselves the embarrassment, of admitting a judgment error on their part. Therefore, most of the investors do nothing at all, eventually inertia takes over and instead of pruning their losses, they let them run out of control.
Have an Investment Strategy
- Have reasons to sell a stock.
- Sell, if bad news is released about corporate developments or a downward revised price target.
- Set Stop-Losses.
- Stop-Loss order, prevents your emotions from taking over and will limit your losses.
Would You Buy the Stock Now?
Review every stock you hold and ask yourself a simple question “If I did not own this stock, would I buy it today?” If the answer is a resounding “No”, then it should be sold. Remember, to have a ‘Hold’ on stock only when you are sure that the company is strong.
If you make wild emotion-driven investment decisions, then chances are that one day you will lose everything. In that scenario, never blame stock market for your ruin. I recommend buying shares as a long term investment but if the company is not performing well, then it always serves to take precautions. Never put all your eggs in one basket, always keep some cash in hand, to cover any potential risk.