Investing Is Like Owning a Shop

It is a good idea to look at your stock portfolio the way a store owner looks at his product stock, to help you see what is good in your portfolio and what is not.

When investors look at their investments as a company, their decision become more rational. This means that you focus more on the entirety instead of the details.

If you own a shop and some of your stocked products does not sell, you will sell them cheap to get rid of them.You will then replace them with new products that you think are more popular among your customers. Products just sitting there cost you money in the shape of shelf life that could be used for products that actually sell – meaning lost income for the shop. Investments are exactly the same.

Instead of looking at every placement on its own, look to the big picture. If a stock loses 50% of its value, it might not be that important if your stock portfolio as a whole gave you a profit of 20%. It is common for new stock traders to get stuck on the details which can create a risk in the decision making process.

It is a good idea to get rid of stock that are not developing the way they should be, the same way a store owner get rid of products that are not selling. One should always question investments that are not developing in the desired direction or contributes to the effect of the portfolio, for example the spreading of risk.

It is also important to consider stop-loss before selling or getting rid of stock to cut you losses.

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