How to Avoid Losing Money on Tech Stocks

Investor psychology is a fascinating topic because it shows precisely why 95% of humans can’t beat the market, even when they dedicate their entire lives to that pursuit. Imagine that. A portfolio manager spends their entire life pretending to be someone they’re not. That’s what actors do, but at least they end up with the best choice of mates as opposed to spending their lives trying to justify their own existence.

We recently read that if you’re down on a position you should pretend like you don’t own the stock and then evaluate its merits by seeing if you can recommend it to others. Try that sometime. It’s literally impossible to do, which is why we don’t recommend stocks in the first place. What they might have meant is wait until you’ve accumulated so much paper loss that you really don’t care anymore. That’s kind of where we’re at with Invitae (NVTA) as we see today’s price flirt with $5 a share after we paid an average of $25 a share for our position.

Losing Money on Tech Stocks

YouTube is riddled with videos talking about making money on tech stocks, but few videos talk about how to avoid losing money on tech stocks. That’s because such topics are boring. Nobody wants to hear a lecture on how diversification can protect against losing money in the stock market, but they darn well should. Here’s why.

Putting Paper Losses Into Perspective

We tell our readers over and over not to sweat the paper losses, and one way to make sure you don’t is by limiting the amount of capital you put into any given stock. That’s what we did with Invitae. If we take the tot