Page 737 - How to Make Money in Stocks Trilogy

Sparring with the Opponent: Arguments with the Ego 39

God.” While his friends were drinking beer downstairs, he was upstairs in
his dorm room looking at stock charts. By 2005, his portfolio had grown to
$2 million, but he says greed was beginning to set in, and Gennady started
taking too many losses as a result. He admits he would sometimes make a
significant amount of money and then give all of it back, because he wasn’t
keeping his sell rules.
Gennady’s desire to make money also caused him to ignore the trend of
the overall market. Because of the volatility that Gennady experienced with
his portfolio, he adjusted his stop losses, the price at which he would sell a
stock if it dropped below his purchase price. In a more choppy market,
Gennady learned to keep a tighter leash on his positions and sell sooner.
“Emotions can get the best of you,” he said, “and bad decisions often lead to
more bad decisions if you don’t have your rules in place.”

Never Fall in Love with a Stock

Kathleen Phillips had a sizable portfolio back in the 1990s and ran it up to a
jaw-dropping amount. At that time, she held strong companies like Cisco
Systems, Intel, Microsoft, and other tech titans. This was a dream portfolio
that she thought would run up even higher. There was one problem. She
had fallen in love with her stocks, because they had given her such large
gains. Kathy didn’t realize how bad a bear market could be and how much
her stocks could correct when the entire market was under tremendous sell-
ing pressure. As a result, Kathy gave back a large portion of her gains.
Today, Kathy has a much greater understanding of market cycles and has
a set of rules to make sure that she locks in gains and vows to “never fall in
love with a stock again.”

Bad Habits
Lee Tanner said his bad habits started in the 1990s, when investing was much
easier and the market was more forgiving if you made a mistake. He picked
some great stocks using the CAN SLIM strategy and made some very nice
gains but was “quite sloppy and lazy on the sell rules.” One stock that Lee
had tremendous success with as a newer investor was JDS Uniphase. He
bought the stock in 1997 and watched it soar through early November 1999.
By that point, Lee was up 1,450% on his original investment. Lee was elated
and quite generous that Christmas with gifts to friends and family.