The word loss is often used to describe actual losses and sometimes used to describe, what is more likely to be a “temporary”, change in value. For example, if you buy a lottery ticket, after the drawing, you either won or lost, and time will not change the outcome. On the other hand, the value of your residence fluctuates, particularly as the economy weakens and strengthens. Most of us don’t equate a downward move in house values as a loss, as there is a general assumption that, while short term changes in home prices occur, the long-term trend is up.
Like most assets, the value of your stock portfolio fluctuates. If you react to a weak market by selling, you have a loss. If, on the other hand, you recognize that the long-term trend for equity investments is up, and refrain from selling, there is a strong probability that a carefully selected and intelligently managed portfolio will eventually attain new highs. Within a portfolio, some shares may lose value and may not recover. Company specific issues should be treated as such. Portfolio management is always a continuing project. Consulting your advisor(s) may prove to be valuable.
All comments and suggestions are welcome.
Walter J. Kirchberger CFA