Plain Money ideas

Investments: making the wrong mistakes

Yogi Berra
Yogi Berra

Yogi Berra was once asked why his team lost, and he responded: “We made too many wrong mistakes.” Over at “Ask Matt,” a personal finance columnist is essentially warning against the wrong mistake.

Here’s what I mean. Matt says, “Investors must bail out when shares decline 10% or more to avoid such a catastrophic loss.” Using such a rule, you would buy individual stocks and track them carefully, selling with any 10 percent loss. But wait . . . lots of stocks declined 10 percent or more back in 2008-09. If you sold then, you took a beating. If you instead held on, you realized a spectacular gain.

Forget about strategies for individual stocks. If you’re in individual stocks at all, you’re probably making the wrong mistakes. Any simple buying and selling rules are such mistakes. A better strategy? Buy and hold index funds.