Sometimes, when people start investing in gold or real estate, they have a touch of trouble letting go. It isn’t just the metal, though. There are people that become attached or sentimental about real estate or stocks and bonds. Some even start hoarding collectible items for more than their monetary value. This isn’t unusual behavior, but one that is bad for investors because it makes it harder for them to see that the time has come to liquidate the investment, get out of there, and move on to something else. Much like gambling, sometimes investors need to cut their losses and becoming attached can cause problems with that.
As such, discipline is a requirement. Investors in gold, real estate, or anything else that can appreciate in value over time will need to understand that making decisions based on emotions will get them nowhere. Just because everyone is panicking due to the Dow Jones crashing badly does not mean they should let go of their securities. Corporate stocks might go down, but economics is a wheel – there’s a chance they’ll claw their way back up. The price of gold may rise and fall but, barring the most disastrous of economic consequences, it will always retain a measure of significant value. Don’t sell due to emotional responses or panic – it leads to terrible decisions.
Of course, nobody holds on to an investment forever. Most people buy them so they can sell them later and make a profit. So when are the good times to sell?
If there are changes in the fundamentals of the investment, it might be a good time. For example, if something makes stocks in Coca-Cola worth a little bit less than normal, this is no reason to sell. The company is still in a strong financial position. However, if they decide to bring back New Coke and once again abandon the formulas that work, then it might be a good time to consider selling. If the changes to the investment are deep enough that parts of it become unrecognizable, consider liquidation.
Obviously, if the investment was a mistake in the first place, then it should be sold before it can become an even bigger problem. Don’t hang on to a bad idea in hopes that it’ll stay above the water – more often than not, it’ll drag investors down with it into Davy Jones’ locker.
Then there are times when the sale must be made because it has become overvalued and too expensive. As the values continue to rise, the investment might end up outpacing its market’s ability to actually buy it. If it ceases to have a market, then the price will drop like a rock.