Loss aversion…

I’m an amateur investor. My tendency is to hold onto bad stocks too long as I suffer from a classic case of loss aversion. Once I own a stock, it becomes personal. The longer I hold it, the more personal it becomes. Here’s the crazy part, when my long term stock begins to slide, I tend to believe it’s going to reverse course and bounce back. I may look at the analytics but hardly see what’s really going on. I see what I’ve always seen and continue to hold onto this free falling stock a bit longer. Knowing my tendency toward holding onto losers, I’ve hired an investment management firm to help guide my financial future. They are firing my losers faster than I ever did. My portfolio has never been stronger. Good.

Leaders are mostly like amateur investors. Once they hire someone, train them, pour into them, and promote them, they have a hard time looking at the facts surrounding their performance. They see what they’ve always seen. They hold onto poor performers a bit too long. You see, friend, firing someone feels like a loss. Here’s my advice to all my clients.

Hire slow. Fire fast. High performing leaders do not hold onto poor performers. High performing systems hold people accountable. High performers love this kinda accountability and thrive when performance bars are clear. High performing systems invest in their high performers and know that a 1% uptick in their top stocks, if you will, pay huge dividends. These leaders celebrate their best and have no problem shaming and shooting the stocks that miss the mark. Hire slow. Fire fast.

What stocks are you holding too long, my friend…

2 Comments

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2 responses to “Loss aversion…

  1. JAMES K GANT

    Chet,
    As a daily reader I don’t praise you enough for your consistently great work on this web-site. Today is a perfect example. Hire slow, fire fast. I love it. Keep up the important work…
    Jim Gant

  2. Thanks, Jim Gant. We will be doing some army crawls in the morning. We don’t call them army crawls any longer, we call them Jimmygants in your honor…

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