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Loss Control

In: Investment Strategies

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  • Bill Jiang

    (Legal & General Investment Management)

Abstract

Investment success requires the ability to protect capital against extreme losses. This chapter introduces the disposition effect that investors tend to frequently realise small gains while holding onto losing positions. It describes the relationship between investment loss and breakeven return to show the difficulty of recovering from deep losses. The chapter discusses the topics of profit warning, broker research and short selling. Investors are advised to manage losing investments with discipline and take decisive actions when company fundamentals deteriorate. The failure to control capital losses frequently leads to poor investment outcomes.

Suggested Citation

  • Bill Jiang, 2022. "Loss Control," Springer Books, in: Investment Strategies, chapter 0, pages 79-88, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-82711-3_7
    DOI: 10.1007/978-3-030-82711-3_7
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