If I sold at $20, while you held on as the stock went to $10, do you really want to tell me that you are not worse off than I?
Perhaps yes, for the following reason. Let's say that both of us agree that some months down the road NTAP will be back above 20. (This is key: if you don't think it will go back up, you were right to sell.)
If I do nothing, then I am not hurt by the trough in the chart, and I can continue to let my holding appreciate for years to come, paying LT cap gains only when I sell far into the future.
If you sell at 20, however, you face the question of what to do with the cash realized from the sale. It seems like a wise move as long as NTAP continues going down, but unless you can deploy it in a better LT investment opportunity, or time NTAP brilliantly by getting back in at the bottom, you're in a bit of a fix. You may well sit there watching the market, glad to be out, terrified of being suckered again, nervous about bear rallies and such, and as a result you may not get back in to NTAP or anything else until the prices are significantly higher than when you sold.
I'm not saying this will happen to you, but it certainly has happened to many others. One advantage LTB&Hers have over traders, in other words, is that they have far fewer decisions to make and are saved from their own emotional wobbliness...
tekboy@well,itsoundedgood100pointsago.pov |
