Investors hang on to underperforming stocks for a variety of reasons, but it usually comes down to emotion. We know someone at the company. We love their products. Or we’re convinced that if we just wait one more quarter, things will start looking up.
They’re not puppies, they’re stocks.
So to cut through the rationalizations, imagine you’re just starting out with a wad of cash in your hand and no stocks in your portfolio. Would you buy each stock you own now at its current price? If not, it’s time to sell the ones that don’t make the cut.
And if you’re still feeling sentimental, just think about the tax savings you’ll get from declaring a capital loss.