No. of Recommendations: 4

I have a Roth with a stock that shows a (for me) considerable loss. It was a takeover. I stopped the dividends from being reinvested as the stock is unlikely to ever make up the loss in increased price and I take the dividends in the Roth in cash.

Unfortunately, I have all too much experience with selections in a qualified account (IRAs) going south. What I have decided, and this is just sharing my own thoughts not rendering advice, is that the choice is always one of prioritizing opportunities.

By that I mean that if I would not put any new money into a particular investment, I have to rethink whether I want to keep existing money invested there. Since losses in a Roth usually have no part in the investment decision (i.e. usually I can't take them off of income or other capital gains), this boils down to the question: "Is this the highest and best use of my money today?" If I don't know the answer, then I consult with someone who can help me. If I do know the answer, and the answer is not only "No" but "Heck No!!", then for me it moves to the struggle of selling at a loss versus keeping and hoping. I have found that the field of investing is a barren field when it comes to hope as a strategy. I have also found that once I sell a dog of an investment, there is a burden lifted from my mind that I didn't even know I was carrying around.

So, to sum up, I would evaluate whether this company is worth new money. If it is not, then I'd get out of it and research other opportunities to employ that capital. If I am unsure of what to do and my confidence is shaken, I would consult with someone that I trust before doing anything. But hoping for the best is usually not a very fruitful deployment of capital.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.