Yiwu Zhang, this is a long post, somewhat off topic.
You took a pretty big hit when the QNTM
went down, something that eventually happens to
anyone who invests over time. It my case, it
has already happenned a few times over the years.
Let me tell you about a psychological trap that I
have visited and which Academics have studied.
When individual investors have a big loss in a
position, their hopes change from investing for
a gain to escape. When the stock gets back
to their purchase price, they usually sell.
This is usually a bad move when stock has been
low for some time and then rises. The rise
usually continues. This happened recently
to a friend of mine who bought BAY around
$26, watched it fall well into the teens, and bailed
out when it climbed back to $27. BAY then continued
to climb past $40 before it tumbled back to
$31 in this crash. Moral: if a stock is steadily
climbing, "the trend is your friend."
On the otherhand, if the stock does a quick
bounce back and you still want out,
sell even though you do not get back
your purchase price. Quick recoveries
often occur after big falls because a stock
is briefly oversold. Such "technical" bounces
rarely reach back up to the old level.
In summary, if you want out on QNTM,
sell on the bounce, even if you lose some
money. Otherwise, if you hold over time,
delay exiting when the stock reaches your
purchase price.
Hope this helps,
Bob |
