by Marc Lichtenfeld, Health Care Expert
One of the marks of a good poker player is someone who can throw away a good hand if he thinks he's been beaten. A less-experienced player might hang on to a premium hand, no matter what the board, or his opponent's play may tell him.
Successful investors do the same thing. There's an insightful trading expression: "Good traders know how to make money. Great traders know how to take a loss."
The question is: Do you know when to hold ‘em and when to fold ‘em when it comes to your investment portfolio? When you buy a stock or option, you do so having undertaken your research and due diligence. It feels good to be doing something proactive that you expect to have positive results.
Nevertheless, it's an act of faith – and when the investment doesn't go your way, taking a loss is one of the hardest things to do following your initial optimism.
I've heard people say, "It's not a loss until you sell." That may technically be true, but I've also seen 10% losses on paper become 100% real-life losses with that mentality. And the truth is, when you sell for a loss, not only are you admitting that you were wrong, but you're also taking a hit to your investment portfolio.
So with that said, I'm going to do something that is unheard of in this business…
Time to "Brag" About a Loser
Typically, investment analysts love to tell folks about all their investment portfolios and all of the wonderful gains they've racked up over the years. Of course, we're truly happy with the winners and I'm personally very proud of my track record.
But I'm going to break with tradition and "brag" about a loser.
Thankfully, I don't have too many examples of trades that didn't work out, but I found one that perfectly illustrates several crucial investment habits that every good investor must cultivate.
In the August 2008 Xcelerated Profits Report issue, I recommended shares of a small medical device company called Somanetics (Nasdaq: SMTS). I did so on the expectation that earnings would increase as more hospitals used the company's technology to monitor oxygen levels in premature-born babies.
But despite my best efforts, the trade didn't work out. Here's why…
The Right Way to Take a Stock Loss
If you remember, mid- to late-2008 was not a great time for the stock market. As a result, SMTS shares fell.
