Peter Lynch nailed it when he said: “The stock doesn’t know you own it.”
The market has absolutely zero memory of how many hours you spent digging through a company’s annual reports before buying. It doesn’t know your name, it doesn’t know your cost basis, and it doesn’t care how long you’ve held it.
It doesn’t know anything. Obviously.
Yet, we invest as if it does.
Psychologists call this the endowment effect; our hardwired human tendency to value something significantly more just because we happen to own it. The moment a ticker symbol enters our portfolio, we value it more than we did five minutes earlier. It becomes our stock.
That emotional attachment is precisely what destroys portfolios. It turns what should be a cold, hard investment decision into a referendum on your identity and character.
And it works both ways. Just as the stock doesn’t owe you anything, you don’t owe the stock anything either.
You can’t just ditch your grandkids or your puppy if you’re unhappy with them (tempting though that may sometimes be!). But stocks? You can drop them like a hot potato the instant they no longer please you and have zero moral qualms about it.
It’s ok to play favourites. Actually, as a stock picker, your whole job is to play favourites! And those that come under your good grace do so for only as long as they earn their keep. If a better looking prospect enters your field of view, it is your duty to embrace promiscuity.
None of this is to say you should judge your stocks simply by their recent market performance. But if the reason that originally attracted you to it is no longer valid, you should cast it aside without guilt or hesitation.
Strip away the ego, ignore your cost basis, and remember that the market is entirely indifferent to your existence. Invest in businesses that work, and leave the emotional loyalty for things that can actually love you back.
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