Beginner Investing - Losing A Little Is Better Than A Lot.

Losing A Little Is Better Than Losing A Lot

As a beginner investing in the stock market you will need to understand that there will be times where you will have to take a loss. If you do your research and homework, you can avoid many of those experiences. Unfortunately there will be times where the markets will correct themselves after a major run up in stock prices. In those times, It prudent to take a small loss instead of sitting there watching a bigger one happen.

The other day when the stock market went through a correction period, I remembered when I was able to minimize my losses by just dumping everything in the morning hours. Waiting until the “panic” and/or profit taking was finished to get back in to the stocks that I feel had no reason to lose value. It will happen to some great companies that are fundamentally sound when the market as a whole take a dive.

A couple of years ago I was listening to CNBC in the pre-market hours, they were say that things looked pretty grim. I went on to a few message boards as well as many different blogs that expressed the same news. According to the streamer that I use to follow my portfolio, the value of the portfolio had already lost about 2-3% of it’s value. I wasn’t comfortable with the overall message that was being put out there by the many different sources, so I dumped my entire portfolio at the opening bell.

I wasn’t happy about the fact that I did it, but I thought it was the best thing I could do at the time. As the day went on, the DOW, NASDAQ and the S&P 500 all fell another 4% or more. My thoughts were correct and what turned out to be a $2000-$3000 loss, could have been a $10,000 loss instead.

Of course that type of situation doesn’t take place every time the markets look grim in the pre-trading hours, but there will be days where you will see the writing on the proverbial wall. I didn’t like the small loss I did take, but I look back on it now and see that later on when the dust cleared in the final hours of that day, I jumped back in a made that money up and then some.

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