This Halloween, Face Your Biggest Investing Fears

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State of the Market

Double, double, toil and trouble…

High cash burn and asset bubble…

The market can sometimes bring ghoulish surprises, particularly for new investors. Like a haunted house riddled with trapdoors, it can seem full of tricks (and unexpected drops).

So in this week’s episode of State of the Market, Chief Income Strategist Marc Lichtenfeld covers one of the spookiest experiences an investor has…

Taking losses.

Some investors are so frightened of failure that they’ll ride a losing stock all the way down to zero hoping for their luck to turn.

But as Victor Frankenstein would tell you, confronting our best efforts gone awry is the only way to avoid bigger catastrophe.

Marc suggests taking one of three routes to conquering your fear:

  • Set trailing stops: When a stock is tanking, it can bring out the worst in us. But setting a trailing stop, or a set value at which you plan to sell your position if it drops, ensures that Dr. Jekyll keeps a foothold even when Mr. Hyde would tell you to hold on.
  • Buy put options: While options sometimes intimidate new investors, these calculated hedges can act as insurance for the positions you hold. Click here to learn more.
  • Use a stock chart: Sometimes, the past behavior of a stock can give you an indication of its future movement. If technical indicators, like support and resistance, suggest that the stock is primed for a move lower, it may be time to back up the Mystery Machine and split.

Taking a loss, as Marc says in this week’s video, is never pleasant. And it’s something you’ll likely have to do throughout your investing career.

But losses don’t have to haunt you. If you can take them quickly and painlessly, you’ll free yourself up for when the next great win comes along…

Click here to watch this week’s episode.

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