MISTAKE: SELLING OUTPERFORMERS AND HOLDING UNDERPERFORMERS

This is one mistake most of us make. We retain underperformers in the portfolio and sell the stocks that outperform in name of taking profit.

LET US CHECK AN EXAMPLE
Zee Entertainment = Leadership Stock

Just Look at the Chart and how Zee Entertainment stock has moved over last 1.5 years. As a matter of fact, Zee was just at 180 when we covered the stock for our clinets in oct 2013  Later I covered the stock as Leadership stock in Sep 2103 . Today stock is at 270. That’s what outperformers and Leadership stocks do – they keep running ahead of everyone. But very few of us have the patience to hold the stock.

Gross Unperformer: Dish TV

Just Look at the Chart and how Dish TV stock has disappointed investors.We covered the stock in nov 2012 when it tried to give a raly. But stock disappointed and broke down. It not only broke down below Horizontal support line but also below 50 week ma and sustained below it. But generally what happens: we are not quick to react to breakdowns. We refuse to take loss and hold the stock purely on HOPE. Remember, stocks under perform for a reason

It’s sad that as investors, we don’t hold stocks that keep running. Instead, we keep stocks that does nothing purely on Hope and pray. The lesson: If stocks break down, just sell and don’t Hope. But if structure of stock intact, then ride it as long as you can

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