Investment is a risky game, as every player should know. There can be no gain without the risk of a loss, and occasionally those losses will be coming your way. We all do our best to minimize our losses, but we can’t control everything. Investment loss can deal a serious blow to your confidence as well as your portfolio, but there are a few things you can do to better handle your bad luck.
- Stay Active
A sudden investment loss can be very jarring, and it is often enough to shock investors into inactivity. This is something that should be avoided at all costs. When you are inactive, your losses are only going to compound themselves and multiply into even greater losses. When you fall off the horse, the only thing to do is collect yourself and get back on. Don’t let an investment loss freeze you where you stand–you’re standing in a hole, and it’s only going to get deeper if you stay there. - React Carefully
While inactivity is the kiss of death for investors, also be sure to control your reactions carefully. After incurring a sudden loss, many investors are more willing to take risks in order to win back their money. It’s a bit of a gambler’s fallacy. Just because you lost the last hand, doesn’t mean your luck is guaranteed to improve in the next. Try not to less your risk sensibilities be altered by your loss. Keep your feet on the ground and your head firmly attached to your shoulders when coming out of a loss. - Learn from Experience
Every event in our lives teaches us a lesson, and this is especially true of failures. There is going to be some amount of failure in every learning process. Think of this experience the same way. You made a mistake somewhere along the road, and it ended up costing you money. Perhaps you were too reckless, or maybe you were too conservative. Whatever the case, learn from your mistakes so that you don’t make them again. Gain some positive insight from your losses. - Be Transparent
Don’t be a secretive investor, especially with your family. It’s not uncommon for investors to hide their losses from their loved ones and attempt to keep up appearances through tough times, but this is never the best route to take. Hiding things from your loved ones creates distance and tension, causing relationship problems that will weigh heavily on your already stressed mind. Don’t hide your losses from anyone who will be directly affected by them. - Accept Change
Time tested strategies eventually wear out. Don’t get too set in your ways as an investor. The market will always overpower you, and if you stubbornly make stock picks that aren’t going to return your investment, you’re going to keep incurring losses. The market is constantly fluctuating, and today’s winning stock could be tomorrow’s big loser. Accept change and be ready to adapt to the whims of the market. Roll with the punches to minimize your losses and come out on top in the future.