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Thursday, October 08, 2009
Austin Edwards :: Townhall.com Columnist
This Mistake Could Cost You a Fortune
by Austin Edwards
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Was the Copenhagen Global Warming Summit Walk-Out a Win for the U.S.?


Just when I thought it might finally turn around, things suddenly took an unexpected turn for the worse.

It's not what you think! 

You might be assuming I'm talking about watching shares of CIT Group (NYSE: CIT) soar from its March lows, only to hit an all-time low just a few months later amid bankruptcy rumors.

But I'm actually referring to something much more painful for me personally: watching Sam Bradford go down hard in the first game of the season, followed shortly by the rest of my beloved Oklahoma Sooners.

My grandfather played football for Oklahoma, and I've been a Sooners fan since I was old enough to walk. So it's been nothing short of devastating to watch Oklahoma lose five straight BCS bowl games and three straight national championship games. And you know what? I really believed thismight be ouryear.

Of course, I'll alwaysbe a Sooners fan, even though they're now the Buffalo Bills of college football. After all, in sports, sticking by your team through the ups and the downsis a virtue. Just ask any Green Bay Packers fan. (Believe it or not, I'm a Packers fan, too.)

Wall Street is a different ball game
For proof, just ask any longtime "fan" of:

Stock

10-Year Return

AT&T (NYSE: T)

(20%)

Honeywell (NYSE: HON)

(25%)

Sprint Nextel (NYSE: S)

(93%)

Sirius XM Radio

(98%)

Data provided by Yahoo! Finance.

Or ask my fellow Fools Rich Greifneror Adam Wiederman. Or even ask Jim Cramer. In his book Real Money, Cramer reminds investors, "This is not a sporting event; this is money. We have no room for rooting or hoping."

Yet it happens all the time. Investing message boards are full of desperate investors who hope some cash-rich behemoth will come along and save their decades-old American superbrand. But as Circuit City investors found out, this is often a losing bet -- especially in this credit-strapped market.

Others ride stocks all the way into the ground because they're emotionally attached to the company's story, products, or management -- and meet with similarly dismal results.

I, for one, am sitting on a major loss in Clearwire . If we're being honest, the only reason I bought shares in the first place was because I liked that it was backed by Google (Nasdaq: GOOG), Comcast (Nasdaq: CMCSA), and a handful of other tech heavyweights.

Ditch that loser!
One of the "20 Rules for Investment Success" from Investor' s Business Dailyis to "cut every loss when it's 8% below your cost. Make no exceptions so you'll avoid any possible huge, damaging losses."

To a sports fan, that advice might seem cruel and unusual, but it's actually good investment counsel. Or is it?

To find out, I dug through David and Tom Gardner's Motley Fool Stock Advisor picks. They often re-recommend a stock even after a big run-up -- or a sharp fall. I actually found two examples where breaking IBD's rule actually paid off big-time:

Stock AdvisorPick

Decline After Recommendation

Gain After reRecommendation

Netflix

23%

199%

Quality Systems

14%

1,141% Continued...

1 2
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About The Author

< Austin Edwards is a Motley Fool Contributor

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