The Undervalued Benefits of Realizing Your Stock Market Losses

“You can’t lose if you don’t sell” is only part of the story

Photo by Maxim Hopman on Unsplash

Stock prices trend up over time, so experienced investors know to hang on through the rough patches. Selling stocks that have decreased in value only locks in the losses, and those losses often disappear on their own as soon as the market bounces back. In the world of investing, patience is a virtue.

That is the cultural narrative. But there’s also a dark side to hanging on to our losing stocks. Some of them will never regain their former highs, and clinging may be evidence of our inability to face up to that reality. In some cases, selling rather than holding makes more sense because the sooner we can recognize and accept our permanent losses, the sooner we’ll be able to divest ourselves of them. Only then will we be able to move on to something better.

A story of unrealized loss

Jane lost big in the Great Recession, as lots of people did. But her loss was especially devastating because she’d always been terrified of investing in the stock market and had avoided doing so for most of her life. She had grown up with grandparents who’d been bankrupted by the Great Depression, and they’d warned her not to trust the banks. They, and later she…