Skip the Mental Accounting

Barry Ritholtz collected some words of wisdom for what to do “when a trade goes awry?” Here’s my offering:

Eddy Elfenbein, manager of the Focused Equity ETF who blogs at Crossing Wall Street, points out: “The worst investor in the world is the person who bought a stock, then realized it wasn’t the company they thought it was and they’re now sitting on a loss.” The investor who refuses to sell because they “don’t want to take the loss” has not realized yet that the loss of capital has already occurred. Waiting to break even is a form of “mental accounting” and a poor use of capital. “The stock is completely unaware of your purchase price.”

Posted by on January 6th, 2020 at 8:24 pm


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