Dear Patrons,
You boarded the a bus, thinking it would take you to your destination. You settled into your seat, having worked for the entire day. As you took out your phone for checking distance to destination, you realized that you had made a mistake.
You had no idea that you were on the wrong bus, heading in the opposite direction. You would miss your appointment. However, you will not leave the bus because you are proud of your decision and you think the bus driver will drive you to your destination.
How absurd is this thought?
If you realize you have boarded a wrong bus. Without any second thought you would get off the bus at next stop and correct your actions by taking the right bus. It is the surge of panic and regret that makes you correct your decision.
Consider the same scenario with your stock investments. You have bought a stock on advice of a friend or relative thinking it as your Right Bus. You thought that this stock will make good profits for you. But it turns out to be a Wrong Bus for you. It starts going down and that friend or relative does not have clue why it is so.
Ideally, you should follow that instinct to immediately correct the wrong and realign the portfolio. But human behavior prevents to do that. You will keep on holding that stock considering that it will make you some profit someday.
This is as absurd as holding on the same wrong bus considering that it will get you to your destination someday.
Investors should always believer in correcting the actions. Not all investments are perfect. But with rightly correcting them brings investments back in order.
Nishit Siddharth Shah