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I am extremely excited to announce my new e-book, SOLID STOCK SELECTION is now available !! Click here to find out more.
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8/13/06 “A Paper Millionaire” I have a few stocks in my portfolio that I am quite pleased with. I bought Northern Orion Resources about a year ago, and have seen the stock go from $2.64 to the current price of $4.67. That’s about a 75% gain, But I haven’t made a dime on that stock. I bought some shares of Lucent Technologies about the same time. This was a sentimental purchase, as Lucent had a large plant in my hometown, and I thought it would climb from the $2.80 I paid for it. (Because it wasn’t purchased using my system, I only bought a few shares.) It has dropped to $2.11 – a loss of nearly 30%, yet I haven’t lost a dime yet. How do I explain these mysteries? It’s easy. I haven’t sold any shares, so my gains/losses are all on paper and not yet in my wallet. You can justify a lot of things by thinking this way, but be careful, it’s a trap. You can fool yourself into thinking losses are not real and that gains are real, and eventually see your gains go away and your losses stay. I learned this the hard way with another stock I hold. It had gone from under a dollar up to over five a share. The outlook looked good. New products, new partners, the sky was the limit. You’d have to be crazy to bail out. BUT, sometimes the trip down can be even quicker than the ride up. I normally would sell half my shares if the price doubled, thus playing with the house’s money. (so to speak) But on this one, I held on until the price dropped back down to today’s level. Still over a dollar, but not by much. Lesson learned; don’t fall in love with a stock. What goes up can come back down, and what goes down, might not ever return to yesterday’s glory. With a stock going the opposite direction, when is the best time to bail out? Is the stock dropping for a reason, or is it market nervousness? Is the price below book value? Maybe the lower price is an opportunity to grab more shares before the market realizes the true picture. Sometimes the drop is going to continue, and grabbing more shares will ensure a larger loss. I hope this gives everyone something to ponder, and realize that gains and losses on paper are not cash in or out of your pocket until you sell. Thanks and good investing to all
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Want a scholarship into the Millionaire Mind Intensive worth $2590? http://www.secretsofthemillionairemind.com The columns, articles, message board posts and/or any other features provided on Wealth Training Source are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author’s own and there is no implied endorsement by Robert Britt of any advice or trading strategy copyright Robert E. Britt 2006 |
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