Disclaimer: I am not a lawyer. I am
only publishing my interpretation of my situation. You should seek your
own legal representation for your own particular
situation. Do not rely on my
opinions or statements for your own purposes as state
and local law varies as do individual circumstances.
This week, I had a friend tell me that he had sold all
of his investments in the stock market. He had stock in
Microsoft (MSFT on Nasdaq), Advanced Micro Devices (AMD on the
New York Stock Exchange, NYSE) and some other publicly-traded
companies. All of these company stocks are at really low share
prices compared to their share prices just a year ago. I was
amazed to hear that my friend had sold everything and taken such
a humongous loss on all of his investments. Plus, the guy is
relatively young - he is only twenty-eight years old (28). He
possibly had decades to wait for those company stock prices to
increase in value and recoup all of his paper losses and stand
to make substantial profits. I was very sad for him, to hear
that he had done this.
My friend claims (and
this really is my friend and not just me calling myself "my
friend") that he could not stand watching the value of his
investments go down more and more every day with not even a hint
of improvement coming any time soon. In fact, he saw nothing but
more declines coming for all of this new year. Besides being
very sad for my friend at selling all of his stock market
investments, his reasoning made me a little disgusted with him
and his immature investment strategy. I have always been of the
mindset to hang on to my stock market investments for a
long-term investment period. Of course, I have had to sell some
stock this past year to pay some debts; but in general, I am of
the belief that you should invest in stocks for long-term
periods - unless of course you make huge paper profits which you
should seriously consider cashing out to make them real profits.
Unfortunately, I have no
good news for my stock market investments either. All of my
stock market investments are "under water" as they say. Still, I
am hanging on to them - they are only losses on paper, "paper
losses" or "unrealized losses". They might rebound before I ever
need them. Hopefully, they will. Of course, I am watching for
lawsuits from my three sour real estate deals. Should a lawsuit
come up, I think I will probably sell the stocks that are not in
my 401k and use that money to pay off my student loans (which a
bankruptcy would not write-off and a lawsuit usually cannot
touch investments held in a 401k retirement account). That is
another thing to mention. My friend did not say and I did not
ask, but I hope he did not sell 401k stocks (although I do not
know if it matters, in regards to income taxes and penalties, if
the shares are sold at a loss - ask you accountant).
I big lesson to learn
from this unfortunate situation for my friend is that you should
not make decisions necessarily based on what you think might
happen. You should base decisions on what you know will happen.
Also, sometimes you may not know exactly what will happen; but
you will know that certain things might happen. In those
situations, plan for the most appropriate action. Plus, take all
of the possibilities into consideration; and think about your
options in depth before you do anything. Ask your friends and
family (plus your lawyer and accountant) their opinions. Take
all of this in and weigh your options, but please do not make
drastic decisions without giving yourself time to evaluate your
options.
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