In this presentation on the RBI Podcast, David Gardner discusses when you sell your losers. Here’s an excerpt from the presentation:
You can ask yourself this on a regular basis, it’s kind of a rhetorical recurring question, maybe once a quarter you could ask yourself this. Am I optimally invested right now for the next five years? In other words looking over your portfolio is your money right now exactly how you would like it to be apportioned going forward.
People tend to focus too much on where their stocks were. In other words if you have a stock that’s down 70 percent you’re sweating it and saying when should I exit that thing. Or maybe you have a stock that’s up eight times in value and it’s taking over a big part of your portfolio and you’re sweating that stock.
We think too much incrementally about each of the stocks in our portfolio and not overall enough about the percentage of your money that’s in each of these things.
When I have a stock, and I’ve had them, that loses 80 percent of its value, I don’t spend much time thinking about it at all at a portfolio level consideration because probably its declined to be a very small percentage of my overall nest egg.
So what I usually think about those big losers, and again I have more than the average bear, when I look over my portfolio I have a bunch of these, they become tax decisions.
Generally I’m looking just to sell them at the end of a year or two, and I’m probably going to net them back against capital gains that I might be taking in order to reduce the capital gains hit that particular year right.
So it’s not at all in this context about the stock itself.
You can watch the entire presentation here:
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