wakalix

Not selling a stock = selling it and buying it back (pretty much)

Apparently everyone has taste memory except me. Maybe this is why I don’t eat much, or weight much. There must be some research on this….

A couple of years ago when was first able to sell the New Focus stock I had, a friend of mine said to me: What if you had it all in cash – the cash value of the stock – would you then spend all that cash on the stock? Of course not, I said. The implication being that I should determine my course of action by imagining myself in the situation where I’d just sold it. This is quite wise. As Neil Pert of Rush says “If you choose not to decide, you still have made as choice.” So, not selling is making a choice, as operationally it’s the same as selling and buying back (capital gains and transaction fees notwithstanding). This approach may be helpful in other situations. Back to the stock example. Foolishly, I did not take my friend’s advice. I held on, and held on, until it became pretty much worthless – something I really did not want to have anything to do with. Let that be a lesson.

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