Each company shares you buy need to be run like a business. Any company that under performs needs to be seriously reviewed with a sell being the logical thing to do. There's a rule of thumb - limit the loss of any stock to no more than 2% of your portfolio. So if your portfolio's size is $100,000 then the loss limit on any stock should be no more than $2000, regardless of what stock it is. I've held BNB, ABS, and CDR and luckily I've been able to get out before the sell offs. However, the trick is also to review your sold stock if the share price rises back past your sell point. Is the new rally for real or is it a bull trap? I've also bought back into several stocks a few times only to see them fall back down again. Experience and a special knack is what it takes. However, my true belief is this; if you only buy shares with money that you're prepared to loose then you will be mentally stronger to tackle the share market head on. If you over commit and place huge amount of funds into the market, then will come under immense mental pressures when the market turns against you. When under pressure you'll most likely make decisions based on emotions. That's where I've come undone. Share trading for me at first was fun as I only committed 25% of my funds into trading. Then as I saw my money grow I upped the share trading to about 75%; big mistake. No one could remain level headed when they're heavily funded into the market during a downturn; unless of course that they've got heaps of money in the bank to see them through the bad. Someone who may have 3 million dollars could place $100,000 on BHP and MQG when they're well and truly down. For us that would be a gamble, but for that person it would be a comfortable act knowing the could afford to blow the lot, but most likely they'd come out winners because they did the opposite to what the over committed punters did (which was to sell their shares due to fear). Keep it low, don't gamble. Use only funds that you're willing to see go downwards for a while.
