Dating & Trading: Making a commitment
HOLDING ON – PART 1
When is it okay to put more capital into an investment?
When is it okay to put more commitment into for relationship?
When the trend you expect is confirmed.
This is why dollar cost averaging on the way up makes sense. Although your cost basis is increasing the stock is proving that is has the quality that you are looking for and that is a strong uptrend. According to my mentor, Dan Fitzpatrick, and from my own experience, you can dollar cost average as the stock is in a down trend, lower your cost average, however, you are stuck with losses over a long period of time.
In any given market (most of the time), there are either sectors or individual stocks that are in confirmed uptrends. You do not have to have your money spread out all over the place, but it is good to keep tabs on a variety of sectors and stocks so you can choose some that appear promising.
I was so ignorant when my company went public. I didn’t think I needed to diversify out of what was an very risky company to have a large holding.
Jim Rohn talks about how you will lose what you have not obtained by personal development. In all of my hard work for a startup company, quite simply, I did not have the mindset of a millionaire, so I lost the bulk of a fortune. It took me years to get over the reality that I had achieved something that I did not have adequate knowledge to keep but kept on risking it inadvisable ways.
Yes, if I could look you in the eyes right now, I would tell you I screwed up and I don’t want you to screw up.
For safety sake, you should not put all of your money in one stock and take out a mortgage on your house if you think you have a winner. If people, law-abiding investors, could so sure of an outcome “it would not be called trading, it would be called money printing” (Dan Fitzpatrick).
The general philosophy is that with all investments, engage in risk management. Understand when you need to get out of a stock if it doesn’t do what you expect it to do when you bought it.
Understand that not all the stocks with make you money, but some will. All the while you must maintain risk management of the ones that lose, then the winners will help pay the bills.
If you have received value or an idea to contribute, please share and comment!
I’ll see you… on the next page Part 2 of holding.