Question: I am invested in a fund that has recently lost a lot of money. I follow your Thrift Savings Plan letter, which is out of the fund. I thus believe that it is best for me not to be in the fund either. I want to get out of it. But, since the fund has recently lost a lot of money, I want to wait a little until its price comes back up. Is this a good idea?

Answer:

No.

I do not know how to predict whether or when a fund’s price will come back up. Maybe someone else can, but I cannot. The algorithm used to give advice in our TSP newsletter simply reacts to actual price changes — it does not attempt to predict them. As long as it is clear to us that a fund is losing money, we stay out of it. Thus, here is a way in which you can answer your own question.

If you were not holding the fund right now, would you be willing to buy it right now? If the answer is no, then you should not own it. Sell it. If the answer is yes, then you should continue holding it.

Related posts:

1. Selling off stocks when they’re down
2. Bonds continuing to earn money
3. Locking in losses
4. Switching to this newsletter
5. The bubble in bonds (or, only the present exists)

One Response to “Should I hold on after losing a lot of money?”

1. pingback from Switching to this newsletter | Peaceful Gains TSP
   April 22nd, 2009 at 4:14 pm

   [...] Should I hold on after losing a lot of money? [...]

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