Wouldn’t you like to turn your short-term losses into long-term opportunities?
I have heard from a few of you asking me for a little more substance. You have already discovered Your Money Character and you want to understand a little bit more of what the process is going to be in the months to come.
Some of you have already called or emailed me and scheduled a face-to-face meeting. For those of you who haven’t, there’s no better time than today to get started with your long-term investing. But maybe you’re a little hesitant because of the ups and downs of the markets you’re seeing…
So let me put on my Professor’s Cap today while I explain the difference between Paper Loss and Realized Loss.
Paper loss vs realized loss
Paper Loss is a temporary loss of value and Realized Loss is selling a security at a price lower than your purchase price (and has tax ramifications).
When the tough times come along in this world, many people allow their emotions to grab them, take hold and drag them down. What they may not realize is the attitude created by these smothering emotions can spill over into their financial investments and can easily destroy those investments.
During the Great Recession (December 2007-June 2009), millions of people saw their portfolios go down in value, many by as much as 50%. Most of these were in “products” (packages of stocks designed by the investment firms) over which those investors had no control. (Note: Owning such products removes the control from the investor as to whether to sell and create a real loss – or stay in. The firms make those decisions for you.)
However, those who owned individual stocks at that time had the opportunity to analyze each company in which they owned shares and could decide if the company or the market was causing the loss. They knew how to follow the guidelines of owning stocks, and had learned that a down market offers the opportunity to buy more of your companies.
Always remember: A paper loss will disappear as the markets begin to level off and investors, once again, begin to buy.
Why buy stocks?
The reason I invest in individual stocks is because I remain in control of when to buy or sell.
The markets will always be bouncing around — it’s their nature due to their various sizes and makeup. The stock market has thousands of stocks and multiple industries, so there will be periods when certain industries will go down in value (bringing that area down) while another industry is headed up in value.
Understanding the individual stocks one owns in various industries allows better control of the emotional factors, thus allowing our intellect to guide us. In other words, when we stand back and investigate why this company is going down in value at this point in time, we may discover that company is actually financially strong, has a great executive team, and the product/service they offer is moving along. Knowing there is no need to react; you can sit tight or even add to the stock during this downturn.
As I write this, an excellent example is presenting itself in the oil industry.
The cost of oil has been dropping for months. It was trading over $100/barrel and is currently below $50. With the price of oil falling, many people will notice the oil companies in their portfolios have gone down in value.
Should they be selling?
It depends on the strength of their individual oil company stocks. If they panic and sell due to the price of oil coming down, they may discover their emotions are ruling them when it should be their knowledge showing the way. We will work together during market fluctuations like this to strengthen your investments, calm your emotions, and increase your knowledge.
And so now I’ll take off my Professor’s Cap with the hope that you are liking what you’ve been learning. I’m having a great time sharing all of this with you.
Let’s get together, face to face, so you can discover how easy it is to experience … and understand … your own money growing in the world of long-term investments!
Let’s have a conversation
Let’s get together, face to face. I will help you experience — and understand — how your money will grow in the world of long-term investments. Let me show you how much fun it can be! Call me, Vicki L Wille, today at 702-878-9562.
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