05-02-2014, 01:02 AM
(This post was last modified: 05-02-2014, 01:06 AM by earthtodan.)
(05-01-2014, 09:24 AM)CritMass Wrote: Ditch the emotions if at all possible. My emotions caused me to lose a boat-load of money on a bank stock in the 2008 crash. It was stock I inherited down from three prior generations. I finally sold the remaining shares and am rolling a loss forward for the next umpteen years on my tax returns. The stock still has not recovered.
Critmass, good point, and that leads me to another example. If I were to take into account the stock options I still own in my employer, they make up more than half my portfolio, even after tax. From a strictly quantitative standpoint, I should not retain any more shares than I would buy in the open market (high single digit % for a high conviction position). That difference - more than half my portfolio size - is too big to be justified by "investing in what you know" or any rational measure. The explanation is that I simply have a different perspective on this asset due to my history with and belief in the company, and I don't want to let it all go. I'm gradually rebalancing rather than suddenly correcting. How much of that strategy is rational and how much is emotional is hard to define.