Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer has learned a lot over his 30+ years of investing. So he created a list of 25 Rules for Investing that can help you avoid the novice pitfalls that even he fell into on occasion.
And one of them is not selling a loser because you think it will come back.
Rule 16: Never Subsidize Losers With Winners
"Investors have only a finite amount of capital to invest. Rather than take the medicine - the loss - they hold on to the losers and sell their winners...[when then need to generate cash]," says Cramer.
Mainly because they think their darling stock will come back and they don't want to be proven wrong.
But Cramer's advice to anyone who is stuck in this position is quite simple: "Sell the losers and wait a day. If you really want them, go buy them back the next day. I also am certain that you never will."
Watch Rule #16 above for more.
And don't forget, we are rolling out one-rule-a-day until we get all 25 rules out! So stay tuned!
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And for more Investing Rules, watch these: