Cover Story
4 / 5
[ ADMITTING DEFEAT ]
Danielle Levy finds out when it is time to accept you
got it wrong and sell out of an investment
Admitting defeat
A
dmitting defeat when a
stock, fund or other asset
hasn’t performed in line
with your expectations is
one of the toughest challenges that
any investor will face.
Investments can disappoint for a whole
range of reasons and this means that
each case must be assessed in isolation.
For example, an investor will need to
ask themselves if the reason it has not
panned out is as a result of a company
or fund-specific reason, external
factors that are unforeseen or out of
their control, or simply a misjudgment
on their part.
It doesn’t get easier
Even armed with years of experience,
selling out at the right time is
something that professional
investors continue to struggle with.
For example, a recent research
paper analysed the daily trades
of institutional fund managers
between 2000 and 2016 and found
that far more time was devoted to
buying investments than selling.
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With this in mind, authors Klakow
Akepanidtaworn, Rick Di Mascio,
Alex Imas and Lawrence Schmidt
concluded that professional investors
displayed skill when buying into
investments, but made poor
decisions when it came to selling –
and this ultimately compromised
their overall performance.
Let it go
It goes to show that it is not only vital
to time your buying decisions well,
but also to recognise when you should
“cut your losers”.
“Psychologically, it is very difficult
to do this,” explains Andrew Wilson,
chief investment officer at Lockhart
Capital Management. “Many
Investments can disappoint
for a range of reasons
and this means that each
case must be assessed in
isolation
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