Never looking back at shares you've sold is easier said than done.
Hindsight is a wonderful thing, they say, but they're wrong. Hindsight is agony, particularly when it comes to investing. If you're not careful, hindsight will break your heart.
Bruce Jackson says he never worries about selling a stock, once he's sold, he never thinks about it again. Well I do. I can't stop myself taking a sneak peek at stocks I've sold, and torturing myself with the results. Because the shares I've offloaded invariably look a lot more sexy than those I bought in their stead.
And even if I can resist looking back, a news story or share price bulletin will always pop up to remind you when a burned out old flame sparks into life again.
Fools rush in...
It happened a few days ago with ARM Holdings (LSE: ARM), which I bought in May 2009 when it was trading at 124p. In the few summer months we spent together, our relationship never flickered into life. The sun was out, markets were rallying and I quickly became impatient. In September, I moved on in search of a bit more action, selling for 127p.
Like an ex-partner who lands a rich and attractive new suitor, ARM has never looked back. It is now trading at 224p, a rise of 76%. I didn't appreciate what I had, and now there's no turning the clock back. Boo-hoo. Poor me.
Even worse, the relationship I subsequently struck up with Royal Dutch Shell (LSE: RDSB) has been tepid at best.
And fools rush out
And it wasn't just ARM. In June last year, I took a fancy to Abbey Protection (LSE: ABB), after Maynard Paton declared it hot stuff, but 20% growth plus dividends wasn't enough for me, oh no, and I ditched it in January, when it was trading at 70p per share. Now it's up to 79p, adding another 13%, and I'm crying into my beer. Abbey, I want you back!
I even find myself getting dewy-eyed and sentimental about investments I've never made. Like precious metals. I've just read that the sector outperformed every other asset class in the last decade, rising a massive 242%, and I completely missed out on the action. Wah! That should have been me!
Now I don't expect any sympathy from you lot. You probably have similar sob stories, and most will have coped far better than me. So should I stop torturing myself with what might-have-been? Of course not. Because the wonderful thing about hindsight is that you can learn from it. And this is what it has taught me.
Be patient
Investing in a company isn't all "wham bam thank you ma'am". You have to take your time, appreciate what you've got and keep believing during the bad times. You can't chase after every little charmer that catches your eye. This is a long-term relationship.
Don't sell too quickly
The more you flit in and out of stocks, the greater the chance that you will buy a loser or sell a winner. Even good companies have humdrum years, but if you offload anything that dips or remains stagnant, you are setting yourself up for heartbreak. Take a look at a few company charts. Sometimes the shares go up, sometimes they go down. If you ditch your stocks every time they go down, guess which stage of the cycle you will miss out on? That's right, the ups.
Love the dividends
It's the little things in a relationship that give you the most pleasure, but it is easy to take them for granted. Like dividends. If you choose wisely, they will put tea on your table well into old age, when all those fancy little growth stocks have long since lost their looks.
Be realistic
There is a good reason I didn't invest in precious metals 10 years ago. It never occurred to me. That means it wasn't a mistake, or a missed opportunity. I just wasn't ready. Some things were never meant to be.
Don't leave your brain behind
I didn't sell ARM or Abbey Protection because they were bad companies. I sold them because I wanted instant gratification, and they weren't delivering it. You should know exactly why you are buying, and selling. If you drop a stock because it is going through a rough patch, you could have a lifetime of regrets. Invest with your head, not your heart.
Don't be too hard on yourself
Accept that you will make mistakes. What matters is that you get it right more than you get it wrong, which is all most of us can ask for. Hindsight, like love, can break your heart. But used carefully, it can also make you a wiser, better investor (although I suspect I'm a lost cause).
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