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Do yourself a favor and get into the market... when it goes down, it's a better time to buy
Why do you care what the "paper" value of the stocks are anyways until you sell it? Even if they all fell from $100 to $1/share, until you sell it, you haven't actually lost any money... So you can just wait it out and when it is back to $100 you can sell it then. It sucks only when you are forced to sell it because you need it for income. If you have a job, you should be hoping for market crashes
that is just not true. your net worth is what it is at any point in time whether you sell or not. a loss is a loss whether you lock it in for tax purpose's or not.
whether you close out a position each day and buy the same thing at the open or something different does not matter.
the saying it is only a paper loss is just not true one bit.
think about it , if you sell an investment at a loss and ride another investment back up , why is it any different trying to ride the same investment back up ?
the answer is it isn't. the saying it is in only a loss on paper until you sell may make an investor feel better but in reality that is all they have whether they sell or not
Do yourself a favor and get into the market... when it goes down, it's a better time to buy
Why do you care what the "paper" value of the stocks are anyways until you sell it? Even if they all fell from $100 to $1/share, until you sell it, you haven't actually lost any money... So you can just wait it out and when it is back to $100 you can sell it then. It sucks only when you are forced to sell it because you need it for income. If you have a job, you should be hoping for market crashes
The OP seems to be one of those brand new investors that think they know it all because they made some money during this bull market. A bull market makes everyone feel like a genius. The fact he is using a crystal ball tells me he could be one of the next wall street victims who end up protesting against fat cats instead of realizing their mistakes.
As to the second part of your response. Many people believe you haven't lost money until you sell. Well, it isn't quite as simple as that. I actually don't agree with that because there are no guarantees in life. If you paid cash for your house during a bubble for $1,000,000 and now its current value is $100,000, you technically are down $900,000 because that is what the market is willing to give you. If you bought a stock at $100 and now it's $1, your account is no longer worth the original amount. There is no guarantee either will go back up. If you get a loan and they ask for the value of your assets, you can't give them the original home value or stock account value, therefore you have lost it as of now.
With that being said, if the company is very solid, then the odds are it will likely bounce back eventually. If it's a balanced mutual fund or something like SPY, then the odds are even better. However, the example you gave of $100 to $1 is not likely to bounce back to $100.
that is the mistake investors make who think because a stock pays them a piece of their own share value as a dividend that being down doesn't count.
in fact i am retiring in a few weeks. my initial income will be based on a percentage of the assets in my portfolio. do you you really think it would only count on what you sold ? of course not. all keeping the money in play means is you vary as to the exact worth like a job that pays only commissions. if your total return is down -you are down and you can take that to the bank,.
The people that bailed out/cashed out back in 2008 and just sat on their stack probably fared much worse than those that stayed the course for the long run.
Just like life, investing is a marathon and not a sprint.
they may chose to switch assets in your example but they were just as down in either case.
in another example if you sold VTI at a loss and bought SPY and road it back up it would make makes no difference than if you sat with VTI and rode it back up.
selling and buying another asset is irrelevant to whether you have a gain or loss at any given time.
the truth is no matter whether you are up or down at any point those gains or losses are all yours the same .
what you have to remember is all future compounding takes place on the value you have regardless if you sell or not .
being down 50% and up the next year 5% is identical whether you take that money that is down 50% and leave it in the same investment or sell it and move it to another investment .
except for a possible tax event if you sell the results are identical.
this is the same error in logic those who think getting a dividend is being paid to wait. all gains are compounded each year off the balance of the year before no matter what your investment is in.
Last edited by mathjak107; 06-07-2015 at 06:46 AM..
the two biggest myths that have lost more money for investors than anything else is "it's only a loss on paoper " and buy low and sell high.
Alright, I am going to exposure my ignorance now. But I can't help it, I want to know. I can "see" the it's only a paper loss fallacy, but as a newer investor myself, I don't get how exactly buy low and sell high is a myth. Isn't that the goal. I am guessing it's a reference to someone buying "anything" because it's at a low and they assume it will go up and they can sell when it gets to be on the high end again without research (such as taking a gamble by buying into a failing company with dropping stock in hopes that it will go back up to its all time high again as opposed to buying into an undervalued company whose stock you researched and know is most likely artificially low at the time).
sure by low and sell high is a goal but usually it fails to produce the results you expect because the trend is your friend. an object in motion stays in motion until it finally hits something .
buy high and sell higher has made way more money for investors.
back in 2008 many folks trying to buy low felt low was when we fell 2000 points.
so they bought in and ended up trying to catch a falling knife as we fell another 4000 points.
many bailed out and lost money or triggering stop losses .
on the other hand the odds of making money and not being the last guy on the line in an up trend are pretty good.
rebalancing when things are down is fine but trying to predict the bottom for a buying spree is usually not going to pan out for a number of reasons.
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