Ask Doc It's one of the biggest traps in investing... one that too many of us fall victim to.
It's called the sunk-cost trap, and it may be the most dangerous trap of all. It's when a person will continue with something just because of the money, time, and effort that has been invested in it – rather than considering whether it's still the best idea.
We've all done it...
We've all bought a movie ticket, sat down in the theater, and then realized halfway through that it's a terrible movie. But we made it this far and we've already paid for it... so might as well finish watching the movie.
Or we keep clothes in our closet that we know we're never going to wear since we already spent the money on them.
And, of course, the sunk-cost trap happens when we buy a bad stock and refuse to sell it. Even when it's obvious we're wrong as we see shares plummeting. We remain committed to the investment. And, worse still, we often put more money into the loser, thinking: "It has to go back up eventually."
This is easier said than done, but... know when to cut your losses.
Emotions make cutting your losses so hard to do. That's why I usually recommend investors use some sort of exit strategy to combat the sunk-cost trap and other costly mistakes. One of my favorite tools is the stop loss: a predetermined point where you promise yourself to sell, no matter what.
The bottom line is that investing is hard... Don't make it harder.
Right now, we're nearly two years into a bull market, and it feels like it could go on for much longer. But the truth is that markets always fall sometimes. Some declines are small corrections – say 10% or so – and some are huge... cutting your portfolio in half.
You want to be prepared before the major drop hits. You're not going to board up your windows when you're already in the middle of a hurricane. So why wouldn't you treat your finances with the same mindset of preparedness?
That's the point my good friend and Stansberry Research founder Porter Stansberry made in a free presentation on Tuesday. He detailed major cracks showing in the market... and reminded viewers that unless they can quickly and accurately explain the plan behind every single stock they own, as well as a strategy of when to sell, they are unprotected from a market catastrophe.
Now, unless you are a full-time money manager, tracking an in-depth protocol for each position in your portfolio is nearly impossible. But Porter unveiled a program that can do the job for you.
If you have any money in the stock market, this is one presentation you don't want to miss.
Click here to watch before it goes offline in a few days.
Now, let's dig into the Q&A... As always, keep sending your comments, questions, and topic suggestions to [email protected]. My team and I really do read every e-mail.
Q: Would you consider any cereal as good as oatmeal? – S.K.
A: Despite both being grain-based breakfast foods, oatmeal and cereal aren't created equal... if you're eating the right kind of oatmeal.
Last week, I wrote about the types of oatmeal you should eat if you want to be healthy. Oatmeal can help reduce your cholesterol, control blood sugar, and bust visceral belly fat.
But I'm not talking about instant oatmeal that's full of sugar and flavorings. Instead, you should be eating less processed oatmeal, like steel-cut. You get a good balance of nutrients without added sugar. For example, a serving of steel-cut oats from Quaker gives you 4 grams of fiber, 5 grams of protein, and just 1 gram of (natural) sugar.
Compare that with one of the most popular cereals in America – Honey Nut Cheerios. It has just 3 grams of fiber, 3 grams of sugar, and a whopping 12 grams of added sugar. Cheerios are a high glycemic index food, which essentially means your body digests it quickly and causes a blood sugar spike. Steel-cut oats do the opposite.
Even "healthy" cereals like Kellogg's All-Bran are still loaded with added sugars. That's the trouble with ultra-processed foods like cereal. You don't have any control over the nutrients. I'd suggest thinking of cereal as a snack instead of a meal you eat every day.
Or do what I do... when I have a craving for cereal, I eat oatmeal. You can load it with fruit, like blueberries, so you'll know exactly what you're eating, and you'll get the nutritional benefits in a natural way.
What We're Reading...
- Did you miss it? You need an exit plan.
- Something different: The Bank of England is cutting rates.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
August 2, 2024