My Realized Loss



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“Soon after I bought the stock recommended by my broker, its value dropped by half so I decided to cut loss “, sounds familiar right.  While investing in financial markets over the long-term is an excellent path to wealth, it’s not unusual to experience occasional losses as investment values goes up and down, depending on market cycles.

Every investors ever incur loss in our investment during the journey, the point is, do you keep track of your “realized gain/loss” on all your stocks’ transaction? Yes, I know , nobody like to mention or talk about their losses made in stocks as the “Prospect Theory “ suggested in one of the famous behaviors bias i.e  “Loss Aversion”


From Wikipedia :

In cognitive psychology and decision theoryloss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains: it is better to not lose $5 than to find $5. Some studies have suggested that losses are twice as powerful/ pain, psychologically, as gains.



Yes !! we feel twice pain vs gain , hence very often , we tend to keep our  loss making stocks and sell our winner too early / soon. I try to keep track on all my gain and loss for all my transaction. Yup!! our total Realized loss ( since start of our investing journey)  = - $249,502 for both accounts (me and Mrs) and our Unrealized Paper Loss “ (accumulative )= $-110,167.

Out of these -$110K , more than half came from these 3 counters 1) Design Studio (-$33K) , 2) M1 (-$21K) , SembCorp Ind (-$9.2k ).

Should I sell all these stocks to cut loss and move on? or keep looking at the “negative “ figure , twice painful as I look at the “positive “ figure. To be frank, I am not so sure , but as far as I know at least I will continue to collect some dividend from some of these counters.



The total dividend I received from all these loss making counter amounting to $36268 , which could at least reduce my loss by around 33%. Well, this is the “beauty “ of having stocks which pay dividend. 

Here, I am not trying to advocate that one should buy stocks just base on dividend yield , it could be a “ value trap” . What I am trying to highlight here is that investing in companies which pay dividend may, to some extent, act as cushion in case we have to book the loss eventually.

As I mentioned before , getting dividend income allow me to reduce the overall loss in certain stock or even made some profit after adjusting to dividend received.

Few examples as below :








Nobody really know what will happen to these loss making stocks I have it now and how it will perform eventually , some may recover from current low ( reversion to mean ) , some may not , depending on their underlying business prospect. I am sure at certain point of time, I will need to dispose some of these stocks which turn it into “ Realized gain /loss “ …but at least I will continue to get some dividend while waiting the story from each stocks to unfold regardless of “ gain or loss “ when I finally close the chapter.

Cheers !!


PS: 
Our realized loss = total accumulative lost "booked ",since start of our investing journey
"Unrealized paper loss " = accumulative loss for certain counter , not just in 1 year.




“You don't actually make or lose money until you sell your investments.” By The Motley Fool.com

Comments

  1. At least it is paying dividends but a few losing money counter would affect the overall portfolio performance...

    ReplyDelete
  2. At least it is paying dividends but a few losing money counter would affect the overall portfolio performance...

    ReplyDelete
    Replies
    1. Yes, indeed, a few " rotten eggs " may drag down our overall performance, but as long as our winner > loser , guess it will be fine ... :)
      Cheers !!

      Delete
  3. this year market very tough

    ReplyDelete
    Replies
    1. Hi Ali,
      Yes , market is really volatile since starts of 2018... bumpy year ahead...
      Tighten our seat-belt and get some war-chest ready !! Market could be quite irrational and offer some real good bargain on certain counters ..
      Cheers !! :D

      Delete
  4. 2018 is another year of STI Index and ofcourse mainly due to the banks. If one are not vest in both, chances are we will be flat or in red.

    ReplyDelete
    Replies
    1. Yah, basically banks are doing well and outperformed the market , my portfolio was just barely flat since I hv more REITs which lagged behind STI.. ..anyway , I am happy collecting dividend from all counters I hold... :)
      Cheers !!

      Delete
    2. Able to maintain flat YTD despite realised loss and unrelased loss so high. How do you do it ....

      Delete
    3. Hi Cory,
      Sorry , may be my message is not clear , the realized loss was referring to total amount of loss since our investing in SIN stocks in 2008/09 , of all the losses we have booked till date. As for the flat portfolio return even with unrealized paper loss of more than -$110K , fyi.. this also referring to those stocks accumulated and not just in 1 year , I have stocks which performed well like REITs ( which I bought long time ago ) , and also Banks and O&G stocks which I bought in 2016 etc,,, all in all , my "unrealized paper gain "= $344K, which gave me a net paper gain of $234K in my portfolio....
      Hope this clarify ... :)
      Cheers !!

      Delete
    4. Thanks for highlighting Cory , have edited the message accordingly... :)

      Delete
  5. Hi STE,

    I guess that's another good lesson out there from you. Humans are all designed in the same way. Most commonly, it's much painful to see 1 rotten egg in a basket of egg as compared to a basket filled with beautiful eggs.

    We often fail to understand that in a basket of 10, we have 9 beautiful eggs!

    ReplyDelete
    Replies
    1. Hi sleepydevil,
      Yes! very true... let's start to appreciate our beautiful eggs from now onward ...
      Cheers !! :D

      Delete
  6. Hi STE,

    I guess that's another good lesson out there. Humans are all designed in the same way. Most commonly, it's much painful to see 1 rotten egg in a basket of egg as compared to a basket filled with beautiful eggs.

    We often fail to understand that in a basket of 10, we have 9 beautiful eggs!

    ReplyDelete

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