Try this experiment. Ask people what their greatest financial mistake was. I bet you never hear anyone say, “I once sold all the speculative stocks I owned that hadn't worked out — and used the money to reinvest in high quality companies!” Why don’t you hear this? Because cleaning the trash out of your portfolio is one of the best moves you can make. Pros refer to this tactic as a flight to quality.
There is no bad time to fly to quality, but it is particularly important – and difficult – to do it when the market is in a lurch. Why is it so difficult? Our thoughts are the children of our minds, and minds, like people, tend to have an unflappable faith in their offspring. To sell at a loss is to be wrong, and we hate that even more than we hate losing money. This is why a losing speculation should really be sold as soon as you realize that you were wrong about your initial assumptions in thinking it would go up. If you stick around and come up with a new set of assumptions, you are giving your mind a chance to protect its wayward children, and it will play tricks on you in order to do that.
Why is it important? Because the entire market may fall, but only the quality companies bounce back stronger after the fall. So stiffen your resolve, sell your losers now, and don't let your mind push you around. Once you have done that, you're free to go bargain hunting. The companies identified here are undoubtedly desirable, and you may be able to buy them at prices that haven't been available in some time. Take these as suggestions only and do your own research before investing, as always.
Note: There are certain tax implications, which I will not go into in detail, that occasionally make selling losing positions inopportune. Understand the tax implications before you make any major portfolio changes.