Tony Chou runs the Investorz’ Blog, a blog about investment and financial advice.
Losing money on investments can be hazardous, not just for your current financial health, but also for your future financial health.
When people start losing money, they begin the ‘losing begets more losing’ cycle. After an investor has lost money on his or her investment, he or she wants to immediately make that money back. So the investor quickly looks for an investment opportunity that seems promising, and then invests in that opportunity. We all know that there is no such thing as an easy lunch, and picking the right, profitable investment isn’t easy doing. So with so much haste behind the second investment (which the investor hoped would pay back the losses from the first investment), the second investment wasn’t properly analysed, thus has a high chance of losing money.
So after 2 consecutive losses, the investor wants to make back the money he or she lost from BOTH of those investments, and ends up losing money on the third investment.
So when you’ve lost money, take a break. Think about what you did wrong. Losing money and then hastily making another investment will only cause you more heartbreak.