Investing in the stock market always involves risks. In financial jargon, we have something called a “magic triangle”. It describes and shows the relation of the three cornerstones of any financial investment: Profit, security, and liquidity. You can never have all three maxed out.
The more your investment tends towards one cornerstone, the less the other two will get applied. I.e.: An investment with a high return (profit) will offer less security and fewer options to get to your money if you need it (liquidity). On the other hand, a highly liquid investment with a safety margin will usually offer a significantly lower profit. You get the picture.
Taking a hit
Why am I bringing this up? Because I just took a strong hit and realized a loss of almost 2000 Euros on my investment in the Dutch REIT (Real Estate Investment Trust) Wereldhave (WRDEF) The shares are caught in a downward spiral for a couple of years now and after two dividend cuts and a decline of almost 65%, I have decided to get out of it.
Frankly, I got out way too late. I should have acted sooner but I still had the expectation for a rebound. I was also quite comfortable with the high dividend yield of 10% in the first year, and still 6% after the first dividend cut. But the second dividend cut would bring the yield down to only 4%, with a perspective of even further reductions down the road. It’s just too many negative points that piled up.
2000 Euros is a lot of money. But, I had no feelings at all while exiting the position. A key factor to success in investment is emotional control. It also helps that I have enough other stocks to balance this loss. Especially the recent run-up in Apple (AAPL) was of great support on that front. My Apple shares are up 96% and I sold a small chunk to make up for the loss and to spread/diversify my investments a little more.
Also, as some readers might remember, I had another great success story. My investment in Virgin Galactic (SPCE) as recent as only 2 months ago, back in December. While I invested only a tiny amount of 270 USD (250 Euros), the company had a stellar run for the last 2 weeks and is up 242%, meaning that my investment more than tripled, almost quadrupled. I bought in 25 shares at 10,57 USD and sold yesterday 8 shares at 35 USD. Of course, it’s not enough to balance the loss of 2000 Euros, but let’s see where this goes. With the sales of 8 shares, I already got over 100% return on my investment and I still kept 17 shares for whatever happens in the near or distant future. Several analysts see this company already as the Tesla (TSLA) of space.
Disclosure: As mentioned, I owe all the stocks mentioned in this article except for Wereldhave (WRDEF) which I just sold.