Time to Prepare for Year End:

This is the time of the year to sit down and review your portfolio. The review should be as objective as possible with the goal of weeding out the losers and concentrating on the winners. The idea is to go over all of your decisions and decide what went right and what went wrong, do not use this as a session to beat yourself up.

Remember that not every investment is going to work out the way you want, but if you can learn from those decisions then the investment wasn’t a total loss. There are two types of capital, real and mental, the cost of losses in real capital can be easily calculated, the cost of losses in mental capital is very much harder to quantify.

The mental capital we expend in making investments can be much more expensive that the real capital over the long term so we have to manage that segment carefully or we run the risk of trading paralysis due to uncertainty and lack of conviction.

One of the best ways to retain mental capital is to sell the losers! I don’t mean the ones that are just underwater, I mean the ones we fret about and worry about, the ones that hold us back from making new investments. If you are holding any investments that you a HOPING will recover sell them now sell them today, hope is not an investment strategy. One more thing do not ever add to a losing trade, averaging down is an almost guaranteed method of going broke.

The decision to sell is often the hardest one to make especially when you take a loss, but by ridding your account of the bothersome holdings it will free up an amazing amount of mental capital that you can compound into winning trades next year.

For more information go to www.campbellreport.com