Don’t Water Your Investment Weeds

Too many investors “water their investment weeds” while picking their flowers.

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And according to the old adage, “if you water your weeds and pick your flowers, you’ll end up with a garden full of weeds.”

It can be extremely tempting to sell stocks that are winners to lock in profits.

And if you’re stubborn like me, you understand the urge to buy more shares when your favorite stock trades lower. After all, if you liked it at $50, you should love it at $35 — right?

But that’s not how the game of investing usually works.

If shares of your most recent investment trade higher, it’s generally a sign that you did something right!

And according to Bill — my boss and mentor at the hedge fund — if it’s working, you should buy more. This way you have more of your capital invested in positions that are actually creating gains.

The inverse is also true.

When you invest in a stock and shares fall lower, there’s an important message being conveyed.

Typically, this means there’s something wrong with the company you purchased, or there’s something wrong with your timing. (Or both.)

Successful investors try to avoid putting more money into losing positions. But rookie investors often throw good money after bad by doubling down on losing bets.

In today’s turbulent market, investors need every advantage they can get. And one of the best ways to tilt the odds in your favor is to “buy more of what’s working,” and consider selling the stocks that aren’t behaving the way you hoped.