Be an investor, not a speculator.

Posted in Blog
09/10/2019 Mduduzi Luthuli

Here is a question I get all the time: “I bought [INSERT RANDOM STOCK]. It is down X%. Should I sell it or hold it?”

The answer should be obvious, and it is that you sell ASAP. I kind of hate to say it (okay, not really), but if you need to ask someone like me this question, you had no business buying the damn thing in the first place.

Note that the fact the stock is down X% is basically irrelevant here. You should not take a position in a security if you have no framework in place for updating your views based on new information.

There are lots of different ways to play the game. You can immerse yourself in studying and understanding financial markets and try to find great businesses selling at reasonable prices.

You can take a passive view that says nobody can accurately assess stocks and thus you’re happy to take what the market gives through index funds.

You can choose a combination of the above or something totally different. There are all kinds of sensible strategies for making money. Choose one and ensure you’re competent in your strategy.

Hope is not an investment strategy.

If you own something that has declined in value and the only reason you have for holding it is “gee, I really hate the idea of locking in a loss” then you are in trouble.

No one will be able to begin helping you until you first help yourself by exiting the position and taking the loss. Consider it school fees.

When people talk about “dumb money” or “the suckers at the poker table” they are talking about hope-based investing.

Subscribe NowA monthly exploration of our relationship with money

Any fool can know. The point is to understand - Albert Einstein