10: The Essential Rules for Beating the Market

Chapter 5. Never Marry a Stock (For Adults Only!)

"Never love something (or someone) that can't love you back; especially stocks!"

Equation 5.1. 

Let's review briefly. You've learned how to think like a fundamentalist, how to use Demand Fundamentals to select only the best stocks, how to refine and narrow that "best list" of stocks by looking at relative value, how to time your entry point through the use of a simple but profoundly powerful technical analysis, and how to know when to sell through the use of an Intelligent Stop Loss® strategy.

In Rule 5, you will learn to remove emotion from owning stocks. You will learn how to be agnostic about the holdings in your portfolio. Why do you suppose that so many investors (and this may very well include you) have an ongoing love affair with one or more of the stocks in their portfolio?

Don't get me wrong—love is a wonderful thing. You can love your spouse, your children, your grandchildren, your home, your work, your country, or even the stock market, like I do. You can love the fact that you may have made a lot of money in the stock market. But you should never, never love a stock.

More Love, Less Money

There is an old saying that "love is blind." There is a lot of truth to that statement. Love tends to gloss over the blemishes and highlight the faintest glimmer of anything positive. Ask any mother, and she will tell you she has the most beautiful ...