Скачать или смотреть Sunk Cost in Investing - Wolf of Investing Part 02

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Are you making one of the most common and devastating mistakes that amateur investors make? This video dives into the profound dilemma captured by the "Shakespeare with a twist" concept: "To sell, or not to sell, that was the question!".
Investors like Fernando often cling to losing positions, believing the loss is only "on paper" until they sell. This mindset follows a destructive pattern: selling winners to "lock in a profit" and holding onto losers to avoid booking the loss. This strategy is fatally flawed and built on self-delusion. As the sources bluntly explain, if a stock has gone down, you are already "Fucking. Down!", whether you've sold it or not.
Making real and lasting change in your investments requires a deeper understanding—you need to know why an investment makes sense, and why one doesn't. The most crucial factor in deciding whether to sell is addressing the underlying reason the stock went up or down.
The ultimate question to ask yourself is: Does the original reason for buying the stock still remain valid?
To answer this, investors must understand foundational concepts, regardless of whether their initial strategy was based on a value play, anticipation of good news coming out, or the Greater Fool Theory:
• Intrinsic Value: Measuring a company's fundamental worth (sales, earnings, assets) against its current stock price. The easy way to find this is by looking up research from firms like ValueLine, Moody’s, CFRA, or Morningstar.
• Market Capitalization (Market Cap): The total value of a company’s outstanding shares, calculated by multiplying the current stock price by the shares outstanding.
• Earnings Per Share (EPS): A key metric that measures a company's profitability on a per-share basis.
• Price-Earnings Ratio (P/E): This ratio measures the value that investors are willing to place on a company’s earnings per share, reflecting market bullishness or bearishness on future growth.
Investors must also consider how investor sentiment—the overall feeling about the market direction—drives broad waves of demand or selling ("shotgun effect"). Shifts in sentiment lead to a "risk-on" or "risk-off" mentality, often correlated inversely with the direction of interest rates.
By embracing the process of "changing your mind based on new information", you can overcome the emotional need for closure and avoid ending up like Fernando—the owner of a demoralized portfolio comprised of all losers.

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From the book: Excerpts from "The Wolf Of Investing" by Jordan Belfort
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