InvestorQ : What can you do when you have thrown good money after bad?
Nishita Gala made post

What can you do when you have thrown good money after bad?

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tanvi Patel answered.
2 years ago

As the legendary investor, Jesse Livermore, rightly said, “The only right thing to do when you are going wrong, is to stop being wrong.” That is exactly what investors never do. It could be partly explained by the fact that there is too much emphasis on conviction in investing. An investor who changes course midway is looked upon as a fickle-minded investor. Nothing could be farther from the truth! In fact, by changing course, you may have just avoided throwing good money after bad.

Great investors like Warren Buffet and Peter Lynch have also thrown good money after bad. It is just that they realized it sooner and embarked on a course correction. When you throw good money after bad, you distort your investment concentration, forsake long term value for the sake of short term gratification and allow emotion to get the better of your judgment. As Lynch said, “You do not need an awful lot of multi-baggers in life to get rich. Just ensure to throw enough money on them”.