Sin #5 – Wrath
When investors lose money, they get angry. And one of the most common ways to vent that anger is to “punish” the investment that burned you by selling it.
The only thing is, mutual funds — as well as stocks, bonds and any other asset class — don’t have emotions, and it’s impossible to teach them a lesson. Making an emotional decision to sell a stock or a mutual fund may wind up costing you more money in the long run.
This is the eternal dilemma for 401k investors sitting on a loss. As Kenny Rodgers put it, “You gotta know when to hold ‘em and know when to fold ‘em.” And while there’s no simple answer on when you should give up on an investment that has lost you money, one thing is certain: Your decision to sell should be based in fact — not anger.