Many investors I talk to always seem focused on the losers. Just because you lose some money on a portion of investments, doesn't mean that the whole strategy is bad. What matters is making money overall on the portfolio level. Losing money is part of the game on a portion of investments. Even Warren Buffett and Peter Lynch are not right 100% of the time.
Everyone is focused on the losers, and thus ends up missing on the big picture.
As they keep losing, their relative weight in the portfolio decreases and if I did not risk more than a certain amount (decreased by dividends received), they become a footnote.
At this point, they do not matter. Unless they turn around, which some time they do. (e.g. in 1999 everyone thought Philip Morris would fail... and it didn't. Also in 2003-4 many thought McDonald's is toast.)
For example, if I invested $1,000 in Lehman Brothers in 2007, I lost $1,000.
If I invested $1,000 in 3M in 2007, I broke even when I sold
But if I invested $1,000 into Microsoft in 2007, I have $15,000.
Note, these three examples ignore dividends received and allocated elsewhere from a risk management perspective. Those dividends shift the return expectations higher.
Back in 2007, it would have been impossible how each one would do.
Most of my investments won't be Microsoft, but most won't be Lehman either.
I expect to make most of my money on about 40% of my investments. The other 60% will likely end up break even on average.
I just do not know which one today will do great, and which one would falter.
Hence, my goal is to make sure I took my entry signal and not mess up with the compounding early on. (TL;DR - Stick to my process)
I sell rarely, because my audit showed me my sales have been a mistake, on average. I do it after a dividend cut, and if a stock is acquired. the longer i invest, the more inactive/passive in holding I try to be...
