Again, It’s All About Choices

ByMatthew

Debt is like any other trap, easy enough to get into, but hard enough to get out of. – Henry Wheeler Shaw

Whether it’s debt, or a relationship that isn’t working out, or a tool that you paid good money for (that didn’t live up to its original promise… ), once we’re in something, we’re often loathe to get out.

There are myriad reasons for “sticking” with something, few, if any, are compelling.

I believe it’s the “sunk cost fallacy:” wherein we’re reluctant to discontinue something because of the “investment” we have made.

The truth is it’s almost always better to cut one’s losses and move on.

A while back I had some Juniper Networks stock. I bought it believing it was going to increase significantly (as do most stock investors… ), but all it did for the first year or so was go down.

But I stuck with it. Until…

Until I heard someone offer advice on how to decide whether or not to keep a lagging stock; the question is: if you wouldn’t buy this stock now, sell it.

I sort of took the advice.

I set a price target that would somewhat mitigate my loss and created an automatic sell order (it finally sold a few months later).

The moral of this story is it is often very hard to get out of something once you made an investment. Whether that investment is money, time or emotions – or all three.

The take-away is: it’s almost always best to suck-it-up and cut your losses when faced with a lagging investment.

And to circle around to Shaw’s words, regardless of how hard it is, it’s always better to be getting out of debt, than it is to stay in debt.

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