"Never turn a trading mistake into a long-term investment."

Turning a trading mistake into a long-term investment is like trying to build a house on shaky ground. The core idea here is simple: if you make a bad decision in buying a stock or any other asset, don’t convince yourself it’s a good choice to hold onto it forever. You might think you’re giving it time to recover, but usually, that’s just wishful thinking—and it can cost you big time.

This idea has been relevant for ages, especially in the world of finance. Think back to the dot-com bubble in the late 1990s and early 2000s. People bought internet stocks like crazy, and then the bubble burst. Many investors watched their portfolios tank but held onto their doomed stocks, hoping they’d bounce back. Some of those companies never recovered, costing investors a fortune.

Let's bring this to life with a real example. Imagine Jane, an enthusiastic new investor, who decides to buy shares in a hot new tech startup. She’s convinced it’s the next big thing. But then, the company publishes a disappointing earnings report, and the stock price plummets. Instead of selling and cutting her losses, Jane thinks, “Hey, maybe it’ll turn around in a few years. I’ll just keep it as a long-term investment.” Fast forward five years—Jane’s money is still tied up in a stock that's gone nowhere or even gotten worse. If she’d sold early, she could have reinvested that money into something more promising.

So, what should you do if you find yourself in Jane’s shoes? First, be honest with yourself. If you made a mistake, acknowledge it. It’s okay—everyone makes them. Then, take a hard look at why you bought the stock in the first place. Was it sound strategy or just a hunch? If the fundamentals haven’t improved, don’t hold onto it out of stubbornness. Sell and reinvest in something with better prospects.

Imagine you’re at a coffee shop with a friend who’s telling you about a bad stock they’re holding onto. They say, “I bought it at $20, and now it’s $5. I can’t sell now—I’d lose too much.” You might tell them, “Hey, I get it. But think about it this way. If you sell now, you can use that money for something else that’s actually growing. Don’t let a bad decision chain you down.”

Mistakes happen. They're part of learning and growing. But doubling down on a bad trade by turning it into a ‘long-term investment’ is like trying to fix a flat tire with duct tape—it might seem like a solution, but it’s not going to hold up. Be smart, be flexible, and always keep an eye on the big picture. That’s the real takeaway here.