HomeHow Cutting Losses Can Be the Best Decision for InvestorsBlogHow Cutting Losses Can Be the Best Decision for Investors

How Cutting Losses Can Be the Best Decision for Investors

Loss aversion is a concept in behavioral finance, in which investors hold on to loss making investments for the fear of locking in losses and/or in the hope of breaking even someday.

 

I have seen so many people, in my career, who were unable to take advantage of other profitable opportunities just because they wanted to avoid releasing a loss. What investors must understand is that the loss has already occurred.

 

I had personally invested in Lalpir Power (LPL) in 2019. A couple of months later I realised that some other stocks were offering much better returns than LPL (despite falling). My average selling price was near its all-time low (not something to be proud of). However, it was one of my best investing decisions because the next stocks helped me generate far more returns than I could have earned with LPL.

 

Unlike relationships, one must not have any emotional connection with stocks 🙂 Keep your biases aside and be completely logical. Assess your universe of investable stocks with an open mind and go after the ones that make most sense.

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