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How I Lost Out on Doubling My Money by Not Following My Gut

investment loss

Usually, if you are an active trader, having a plan is the best approach. You need to figure out when you want to enter and have a strategy to guide your exit. Otherwise, a quick gain may be offset with a fast investment loss. However, if you set your sights too low when you plan the timing of your exit, you can miss out on an exciting opportunity. Similarly, if you don’t listen to your gut, you might regret selling when you do.

How I Lost Out on Doubling My Money

In April 2009, I invested in Rite Aid (RAD). I was able to acquire shares at $0.50 each, so I felt that my risk was minimal and that there was a decent amount of potential for gains.

Over the next few weeks, the stock trended upward. I was watching the value of my investment grow but had incidentally set my initial sights fairly low.

Even though my gut was telling me to hold on, I ignored it. Instead of keeping my investment, I sold when the stock value reached $0.75. While that is certainly a respectable gain (50 percent) over the less than two weeks I held the stock, I missed out on even greater rewards.

RAD kept trending upward into mid-2009. In early May 2009, RAD was worth more than one dollar. By the beginning of June 2009, the stock’s value hit and exceeded the $1.50 mark.

In September, it surpassed $2.00 before quickly coming back down.

Had I followed by gut, I could have easily doubled or tripled my money. With a little luck, I may have even quadrupled it. But, I didn’t listen to my instincts, and, while I’m happy I came out ahead, I could have done better.

What I Learned from My Experience

While I am still an advocate for having a solid exit strategy, I approach the situation differently. First, I try and make sure that I haven’t set my sights too low when I pick a point to sell.

When I purchased RAD, I was overly cautious. While caution is wise, it can mean missing out if you allow fear to dictate your decisions.

Additionally, I give myself permission to assess what my gut is telling me. If something in my mind is telling me to hold on, I try and figure out why that is happening. At times, it’s because I learned something new after making my initial investment that makes sticking with it a smarter decision. In other instances, it’s pure optimism.

However, since I allow myself to look at my reasoning, I can figure out if my gut is actually leading me in the right direction. If I find any indication that is the case, then I don’t always follow my initial plan. Instead, I let the investment ride and monitor the situation reasonably closely. I also set a new exit point that feels appropriate based on what I know now.

Ultimately, it’s impossible to completely predict what any stock will do when you buy, so reassessing an investment if you gather new information is a wise move. Shifts in company standings can happen quickly and so can investor sentiment, and I am not afraid to consider the current climate if my gut is telling me I could miss out again.

Have you ever suffered an investment loss because you didn’t follow your gut? Tell us about your experience in the comments below.

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