Sometimes the most dangerous risk to your portfolio is you—because one of the more difficult actions an investor faces is when to sell a stock.
Instinctively investors want to add to their winners (even when there’s no more meat on the bone) and sell the (temporary losers) because the losses are too hard to stomach. In both cases, inertia takes hold, and years later, the right choice becomes crystal clear.
Too often, investors bet their savings on “ideas” and not “value.” Ideas are a dime a dozen. Discovering hidden value takes work, years of experience, and over time, is quite fun.
Do you want a phone rep that “yes ma’ams” you, or an advisor grounded by the principles of a prudent investor? The prudent investor knows that ten ideas maybe produce one, maybe, good one.
In tough times, does your advisor stand his ground, or does he “yes sir” you? In other words, who’s got your back in times like these? Let me show you the way with my monthly Survive & Thrive newsletter. You can sign up here, but only if you’re serious.
In the September 2015 issue of Richard C. Young’s Intelligence Report, Dick Young wrote:
The Prudent Man Rule is based on common law stemming from the 1830 Massachusetts court formulation Harvard College v. Amory. The Prudent Man Rule directs trustees “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital invested.”
Since I started our family investment management firm in 1989, I have operated under the assumption that the Prudent Man Rule to this day carries as much weight as it did in 1830. Common sense and prudence just don’t go out of style—ever.
Originally posted on Your Survival Guy.