100-Day Reading Sharing Plan — Day 68

A Random Walk Down Wall Street

1. To avoid turning paper losses into real ones, and to avoid having to admit their investment failures, investors may refrain from selling stocks or funds that have fallen in price. However, investors are generally more willing to sell their winning stocks, as this allows them to enjoy the sense of success from being right.

2. Also remember: never believe anything said by someone caught up in a temporary frenzy.

3. Investors should also never forget an old adage: "If something seems too good to be true, it probably is."

4. For investors, leverage is a potentially dangerous tool. An unleveraged investor can continue to hold bonds whose prices have fallen, hoping that the price will eventually rebound or that the bonds will mature at par value. A leveraged investor, in a sharp downward price trend, may be forced to liquidate their bond positions, turning temporary paper losses into permanent ones.

5. When investing money, how much return you want should depend on whether you want to eat well or sleep soundly.

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