Present Tense Investing
Forget past performance, would you buy this stock today?
Whether you're a fund manager or individual investor it's important to re-purchase your stocks each and every day. What do I mean by that? It sounds like a lot of churning designed to feed the Wall Street Commission machine.
We must mentally go through the exercise of looking at our stocks with the eyes and temperament of a new investor. It is important to recognize that most of your stocks come with emotional baggage just like lovers, husbands and wives. Our winners have rewarded us in the past so our natural inclination is they can do no wrong and will continue their out-performance. The losers are the cheating lovers who have burned us time and time again and must be jettisoned at the first available opportunity.
Forget for the moment that your Freeport McMoRan (FCX) is up 100% and, yes, even forget that Citigroup (C) which you thought was a steal at 40 and is destroying your net worth each and every day. Let's focus. Look at your portfolio with the eyes and temperament of a new investor.
Pretend for the moment that you are starting off 100% in cash and you've decided to invest your hard-earned money in stocks.
Go through every one of your holdings and ask yourself this simple question. With the information I have in hand right now would I purchase this security today? Forget the fact that it is up or down. Forget taxes, losses, everything. Just focus on each stock with the information available right now.
Put a check mark next to all of your purchases and look at your list. Pick up your phone, call your broker, go online whatever it takes and sell every stock without a check next to it: not next week or the next Fed meeting, but today.
No matter how long we play this game this simple rule just seems to slip our mind especially in stressful times like the present. We get caught up in the Wall Street noise coming from every talking head searching for 15 minutes of fame (I include myself in that statement).
By forcing yourself to mentally re-purchase your stocks your portfolio will go through the evolutionary process of natural selection. Nature decided a long time ago that dinosaurs were due for extinction. Take a good long hard look at your list and make sure it isn't starting to look like Jurassic Park.
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