Selected excerpts from the Knowledgebase -9
I’ve decided to do a daily small excerpt from the Knowledgebase as sort of a thought for the day. In many cases they will have extra thoughts of mine, or small updates. I hope you’ll find them interesting.
Here’s the ninth:
You’ll read a lot of propaganda about how you should almost never sell. However, if you make a well thought-out decision to sell several stocks for what you perceive to be good reasons, and then make an equally well thought-out decision to buy several replacement stocks for what you also perceive to be good reasons, it’s simply not plausible, and it’s even silly, to claim that you won’t end up better off. It would imply that your judgment in picking stocks is not only terrible, but actually reversed!
If you look at two stocks and say to yourself “This one is a Sell and that one is a Buy,” don’t you think that, ON AVERAGE, the ones you think are buys will do better? I’d bet a bundle that, on average, the ones you figure are buys will do better than the ones you figure are sells! If not, why are you bothering to evaluate stocks at all?
I’m not saying my replacement stocks always do better than the stocks that I’ve sold. What I’m saying is that I do my best and use my best judgment, and over time I expect that companies I think are going to do well will, on average, do better than companies I think will do poorly. (If not, I should just put it all in an index fund.) I may sell a particular stock that outperforms my replacement stock over the next quarter, but so what? I’m not perfect. That’s how I think about it anyway.
Why hold on to your failed positions? They have little going for them except that you are already in them. I doubt you would dream of buying most of them now if you weren’t already in them. I just don’t think you should hold on to a poorly functioning company on the basis that it might transform itself into something successful some years in the future.
For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.
A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board