Please join me at the Las Vegas Money Show, Tuesday May 11, 2010.
In the beginning, its very awkward to grow out your hair. Likewise, with a stock or other investment, a new position can feel awkward. We check it often, and sometimes find its not looking as we want — maybe going entirely the wrong way. After awhile, if neither the stock nor the hair has disintegrated, we can get comfortable.
In the middle phase, to grow a long braid, one has to do nothing. Sounds easy but funny it doesn’t come very naturally for most of us! With hair, everyone from friends to stylists – and stylists are the worst! – suggests a shorter cut or wonders aloud about the upkeep.
Likewise, in the middle phase of growing a big investment position, if its moving the right way, you have to sit on your hands and skip many opportunities to sell. Neither hair nor position can grow to its full potential if you keep messing with it.
Nothing grows forever. We have to remain alert for a change of character and eventually make the hard decisions. My blonde hair darkened. Okay, I could deal with that. Faced with gray wisps coming in, I had a choice: Hang on and watch the gold slowly whittled away or lop the braid while it was still useful (undyed hair is made into wigs for kids on chemo. see before and after pics of my “harvest”.)
Similarly, a change in character of the markets begs a decision whether to let the downdrafts slowly erode positions, or get out while the getting is still good.