Your money is lost when you buy a stock
- Thread starter deaddog
- Start date
it depends on your intent.
true for a long term holder, not true for a short term holder.
We need to get into the specifics when we get into a position. The eventuality is either profit or loss. It is a loss when the market price is below the purchase price plus commission. One can decide to make it an unrealized loss or cut loss. Possible triggers for loss situation.
1. Money - e.g. get out when it's 10% below cost.
2. Technical - e.g. price break support.
3. Time - time is money. Get out of positions that are not giving sufficient returns and put into stocks with better potential.
Of course, we need to consider getting out of profitable position i.e. taking profits. Stan Weinstein's Stage Analysis is good guide. No stock will last forever.
Warren Buffet is a longterm investor. He got out of Airlines with substantial lost.
1. Money - e.g. get out when it's 10% below cost.
2. Technical - e.g. price break support.
3. Time - time is money. Get out of positions that are not giving sufficient returns and put into stocks with better potential.
Of course, we need to consider getting out of profitable position i.e. taking profits. Stan Weinstein's Stage Analysis is good guide. No stock will last forever.
Warren Buffet is a longterm investor. He got out of Airlines with substantial lost.
Yup mental accounting is fun, but not reality.
People couldn't understand when the EuroZone had negative bond yields why anyone would put their money into them - putting aside many pension funds are required by law to do so no matter the yield - the same people will hold a losing stock that has negative principal because it might come back.
"I'm not as concerned about the return on my money as I am the return of my money".
I consider trading a business.
I buy assets and hope to sell them at a higher price than I paid for them. {Any asset be it equities, futures, options or currency. I currently trade equities))
I have a ledger so to speak. On one side is my money and on the other is my assets. Add them together and you have my net worth.
When I buy an asset the money is reduced and the assets are increased.
If my networth consists entirely of assets the money is lost. (I have no money)
My assets have increased but if Ineed money to buy something else I have to sell assets.
There is no gaurantee that you can sell your assets for what you paid for them.
So yes if you buy any asset for money your money is gone and you own an asset. You want to get your money back, you sell the asset.
You can only write off losses once you close the position and it becomes realized...up to $3000 per year (additional losses carry forward and can be subtracted in subsequent years) for retails / non professional status.
What depends on what stock you're buying?