Lessons from All-Time-Greats: Bernard Baruch’s Inability to Cut Losses – The Average Joe


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    Lessons from All-Time-Greats: Bernard Baruch’s Inability to Cut Losses


    August 26, 2021

    bernard baruch investing lessons

    Bernard Baruch was one of the greatest investors of all time — who shared his many investing lessons in his memoir — Burch: My Own Story.

    Despite his tenure on Wall Street nearly a century ago, these lessons are still true. today Many of his investment failures came from the same issue — his inability to cut losses. Here are some of his top lessons…

    Lesson 1: Don’t buy too many different securities. Better to have a few which can be watched.

    • Why does it matter? Diversification is important, but having enough time to keep up and manage each company also matters.
    • According to a past study, 12-18 stocks achieve 90% of the benefits of diversification.

    Lesson 2: Learn how to take a loss and do it quickly. Don’t expect to be right all the time.

    • Why does it matter? As your losses grow, the return needed to return to breakeven gets exponentially larger.
    • According to the William O’Neil rule for selling stocks, investors should cut losses at 8%.

    Lesson 3: Periodically reappraise all your investments to see whether changing developments altered their prospects.

    • Why does it matter? Companies are constantly evolving and it’s fine to change your mind as the direction of the company changes (i.e. disruption, regulation).
    • It’s better to see the change early and take the loss— momentum can often drive a stock price much lower or higher.

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