Tanked position: sell or hold?
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Tanked position: sell or hold?
I own a country-specific ETF that accounts for around 10% of my VP. I bought it in April 2008 - at that time I knew nothing about PP and was peacefully blinded by buy-and-hold paradigm. Yes, it was performance chasing as this ETF had been doing great for a few years when I bought it. I saw my position rise for over 20% and then fall -70% in the blood bath of the last market fall. It gained a lot since the bottom, but still sits around -30% form the purchase price.
I feel thst This ETF doesn't belong to my VP. I wouldn't buy it now because it's too volatile for my stomach. I'm wondering if should sell it or keep it until it at least erases the losses. I understand that this is more of a psychological dilemma: I just can't see that horrible -30% in my portfolio and feel eager to do something.
I realize it may never appreciate to the point of breaking even, so I don't like the idea of keeping it. And yes, I can't stand seeing that big red negative number. On the other hand, what if I sell it and then it shoots to the sky over the next couple years?
What do you folks think?
I feel thst This ETF doesn't belong to my VP. I wouldn't buy it now because it's too volatile for my stomach. I'm wondering if should sell it or keep it until it at least erases the losses. I understand that this is more of a psychological dilemma: I just can't see that horrible -30% in my portfolio and feel eager to do something.
I realize it may never appreciate to the point of breaking even, so I don't like the idea of keeping it. And yes, I can't stand seeing that big red negative number. On the other hand, what if I sell it and then it shoots to the sky over the next couple years?
What do you folks think?
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
If your best friend asked you the same question, what would you tell him/her?
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Tanked position: sell or hold?
I agree with Clive, sell half if you are undecided. Don't limit yourself to binary choices if you don't need to.
"Machines are gonna fail...and the system's gonna fail"
Re: Tanked position: sell or hold?
OK, looks like we have 2 votes for partial sell. I seem to like this idea - in fact I have this ETF in 2 separate accounts so it's a no-brainer to sell the smaller of the two portions. Also, I could buy EMB with the proceeds so I won't feel missing any surge in emerging markets.Pkg Man wrote: I agree with Clive, sell half if you are undecided. Don't limit yourself to binary choices if you don't need to.
As a side note.... Isn't that funny how our brain tricks us into artificial "pain" from those numbers?
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
I would say "hold on to it", although mentally I really would like to get rid of it.MediumTex wrote: If your best friend asked you the same question, what would you tell him/her?
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Ideally, you should have a system that automatically indicates when it's time to get out. Think of the PP's rebalancing bands for instance. Once you decide on the bands you should act on them without second guessing. Same thing goes for buying, this way emotions will be out of the way.
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Re: Tanked position: sell or hold?
What price can you put on piece of mind?
Sell it all and invest it in your PP. You'll eventually recoup your losses. You'll sleep better too.
Sell it all and invest it in your PP. You'll eventually recoup your losses. You'll sleep better too.
Re: Tanked position: sell or hold?
Right you are, unfortunately I bought at the time when I hadn't yet known what real volatility is.Lngtermer wrote: Ideally, you should have a system that automatically indicates when it's time to get out. Think of the PP's rebalancing bands for instance. Once you decide on the bands you should act on them without second guessing. Same thing goes for buying, this way emotions will be out of the way.
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Vote update:SmallPotatoes wrote: What price can you put on piece of mind?
Sell it all and invest it in your PP. You'll eventually recoup your losses. You'll sleep better too.
Sell half - 2
Sell all - 1
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Excellent response MT. There is a lot of value in listening to the "deep inner voice" and clearing through all of the mental clutter.MediumTex wrote: If your best friend asked you the same question, what would you tell him/her?
Foglifter, if it were me, I'd sell it all and move on. I've made some mistakes in the past (prior to the PP) and I realized I couldn't afford the attention the lagging investment required. You might be agonizing over this fund for the next several years. Why put yourself through that? Chalk it up to paying for an education and focus on replacing the loss with more earnings.
Re: Tanked position: sell or hold?
When I converted everything to the PP last year, I couldn't decide when I should sell my existing investments, so I set a date when I would sell everything, regardless of the prices on that day. Now I have no idea whether I could have done better, because it's a done deal and I don't track those stocks anymore.
There's a strong endowment effect when you own something that makes it seem more important than it is. Would you buy it today at the current price? If not, you might just be holding onto it because you already have it.
There's a strong endowment effect when you own something that makes it seem more important than it is. Would you buy it today at the current price? If not, you might just be holding onto it because you already have it.
"Any good investment, sufficiently leveraged, can lead to ruin."
- Edward O. Thorp
- Edward O. Thorp
Re: Tanked position: sell or hold?
Wong and Otto, thanks for your insights, very thoughtful. I guess if negative emotions and time spent on mourning the investment losses were easily quantifiable I'd sell it all long time ago.
Right now I'm almost certain I will sell one portion soon and then it'll be easier to get rid of the second.
Right now I'm almost certain I will sell one portion soon and then it'll be easier to get rid of the second.
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Confess everything! What country ETF?
Everyone makes these mistakes in investing so you just learn and move on.
In the past I've sold stinkers and felt good about it as I didn't worry about it any more. Once I accept I took the loss I just move on. But depending on the investment it could make sense to wait it out. But if it really is bothering you, and doesn't fit into your portfolio strategy, I'd just sell it and put the money somewhere that you think will be more productive.
Everyone makes these mistakes in investing so you just learn and move on.
In the past I've sold stinkers and felt good about it as I didn't worry about it any more. Once I accept I took the loss I just move on. But depending on the investment it could make sense to wait it out. But if it really is bothering you, and doesn't fit into your portfolio strategy, I'd just sell it and put the money somewhere that you think will be more productive.
Last edited by craigr on Fri Aug 13, 2010 12:37 pm, edited 1 time in total.
Re: Tanked position: sell or hold?
Oh boy... craigr is the one I can not hide anything from.craigr wrote: Confess everything! What country ETF?
Everyone makes these mistakes in investing so you just learn and move on.
RSX (Market Vectors Russia). Heavy on energy stocks. The ETF itself is new, but I was blinded by a nice multiyear run of a similar closed-end fund Central Europe & Russia Fund Inc. (CEE). Note the nice 3-digit return scale on the right - hundreds of %%:
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Sell it.
No rule of law = no respect for contracts = too much risk, especially to foreign capital.
The fact that Russia has terrible demographics would seal the deal for me.
No rule of law = no respect for contracts = too much risk, especially to foreign capital.
The fact that Russia has terrible demographics would seal the deal for me.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Tanked position: sell or hold?
I know this all firsthand. I saw the '98 Treasuries bubble bust and 4x currency devaluation in one day, the merchants were closing the stores, the ATMs didn't work. For over 2 decades now Russia is talking about moving from resource-oriented economy to technology-oriented, but this is very hard to do when you literally sit on vast oil and gas reserves. To be fair they try to improve demographics by throwing in some carrots: every woman gets ~$10,000 for the second child, but this is hardly enough in light of all other issues.MediumTex wrote: Sell it.
No rule of law = no respect for contracts = too much risk, especially to foreign capital.
The fact that Russia has terrible demographics would seal the deal for me.
Yep, I was blinded by the 2002-2008 nice run of Russian market. Maybe if it were less spectacular I wouldn't fall into the trap. I'm so glad to have discovered BH and PP. Better late than never.
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud
Re: Tanked position: sell or hold?
Done. Sold it all and feel great. No more skeletons in my closet.MediumTex wrote: Sell it.
Thanks everyone for sharing your thoughts.
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
- Talmud
- Talmud