Everyone’s a guru when they’re right, at least in their own eyes, which is why, in mature bull markets, you find gurus all over the place—whether you are looking for them or not. For the most part, these guru-come-latelys are easily rattled when things go against them. When XYZ was rising, those who recommended it seem to know everything about the (in this case fictitious) company and its prospects, but as soon as it starts to fall… silence. They would rather talk about some prediction of theirs that did work out, thereby preserving their aura of omniscience.
That’s a bad habit, as it serves the guru, but leaves the believers in the lurch.
What to do when you buy a stock and it falls? The trick is to know why you bought it in the first place. If, for example, you bought the stock because it was in a rapidly growing sector, and it was the industry leader, then you should sell only if the industry’s growth has slowed, or if a competitor is threatening to take away the top slot. If you bought it because it was going up (and here, you need to be honest with yourself), then yes, obviously, you sell it when it starts to go down, because the condition for which you bought it no longer holds true. The same holds for any reason you may have bought a stock, and it even works in reverse. If you sold or stayed away from a stock, and it goes up, ask yourself why you stayed away, and whether or not anything has changed.
Omniscience to the wind, I hereby offer five stocks that I was wrong about, and about which I have reversed my opinions. Mmm… that’s good crow! On Monday, I’ll examine another five stocks about which I appear to have been wrong in the short term, but which I believe I will eventually, and perhaps before very long, be proven right about.
As always, remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.