Financial Fiction Friday #1
Holding the Investment vs Holding the Bag
I love your enthusiasm but this is just terrible advice dressed up with the implication that holding depressed stocks (or cryptocurrencies) through thick and thin will save your butt in the long term. Three examples of stocks outperforming their expectations does not equal a strategy. This idea will get people hurt.
Do you have the patience and the fortitude to play the odds that the stocks you own will be one of the lucky ones? Holding for the sake of holding is not a strategy.
Amazon took nearly a full decade to return to $100+ per share. Could that money have been better invested elsewhere in the meantime? Yes. Could you still have bought back in to Amazon sometime between the bottom and 2009 when it cracked $100 again? Yes.
I agree that picking the right investments and holding those investments is important. But our friend forgot one detail in his thesis: holding them at the right time. You may never know for sure when that may be, but you can make educated guesses. When you are wrong, learn the lesson and move on. If you already have the loss, sitting on a -90% position hoping for a 1,000% return to make you whole isn't logical.
For those investing in a brokerage account and have significant unrealized losses, taking a tax loss is the smartest play. Do you expect your position to rebound in under 30 days? Take the loss and thank me later when you can offset future gains or income for years.