HOW TO LOSE MONEY

     Every seasoned investor has experienced losses in their portfolio. Naturally, the object of investing is to make money but novice investors need to know how to handle the inevitable losing positions in their portfolio. The first rule is to not panic and sell just because of market gyrations that may temporarily affect a stock or whole sectors. Value investors who buy distressed securities will seldom buy at the bottom of a stock's range, therefore losses almost always occur when taking a new position. Owning stocks is not a "Buy and forget" proposition, one must stay apprised of a company's situation. Ask yourself if the reason you bought the stock is still valid. Has anything happened that could change your opinion about the company? If the market is simply not done punishing your stock you may consider adding to your position, all other things being equal. On the other hand, if after a reasonable amount of time the problems of your company start to look insurmountable, you may have to actually realize a loss. Even if that happens, all is not lost. The duds in your portfolio actually do have some value because they can be used to offset gains you have taken during the current year. Just be aware that any losses that exceed gains are limited to $3000 each year. If you have large losses, then you have to carry-over them into future years for tax purposes. Every year, I examine my losing positions to harvest offsetting losses but this year I could not force myself to sell because I still believe in all of them and there are many. I view these losers as the future of my portfolio. When I look back over the years, I have come to realize that underwater positions were not such a big mistake. The biggest mistake was not taking a chance on young struggling companies that have become the largest, most powerful companies the world has ever known.