This is something that you must never forget because it is always true:

What you paid for your stock is 100% irrelevant. All that matters are what your stock is worth today and what you think the stock will do in the short term and long term future.

Here’s an example :

You bought $10,000 of ABC stock (500 shares) six months ago. Let’s say today that stock is only worth $4000. There is only one relevant question you need to ask yourself.

“ if I had $4000 in cash, that I could do anything in the world with, would I buy ABC stock with it?”

If the answer is anything other than “YES!”, sell your stock and buy whatever your answer was. And I let’s say you hold onto your stock and do nothing. Let’s say a year from now it jumps all the way back up to $15,000! You’re probably feeling pretty good about yourself for not panicking when the stock was down, right? Well, let’s add one fact.

What if you sold your shares of ABC stock today and bought 35 shares of XYZ stock with the $4000 you received from the sale? Let’s say a year from now the XYZ stock is worth $90,000.

Knowing that would have still been a good idea to hold onto the ABC stock? Obviously not! You actually just cost yourself $75,000 in opportunity cost because you were letting your financial strategy be guided by irrelevant information. We live in a different world than we did when you bought your stock. Unless you invent a time machine, you can only look forward. Sure, taking a loss might help you a little on your tax return at the end of the year, but that is “small potatoes” compared to what you could potentially gain by looking at your current portfolio as green cash that can be used in any way you wish. It’s not stock. It’s money. I think if it that way and then start making decisions about what to do with your money.