The Art of Execution: How the world's best investors get it wrong and still make millions

by Lee Freeman-Shor

3. Don’t go all in A corollary of the previous point is to never put yourself in a position where you find you are still convinced by your original investment idea but are not able to invest more money when the share price falls. That is poor money management. Keep some powder dry.

Don’t sell too soon

My experience of managing an elite group of professional investors is that when the shares of a high-conviction company fell in price, most invariably stayed optimistic (rightly or wrongly). Most gave me chapter and verse as to why the story and the fundamentals had not changed, and why it still remained a great investment idea. But most did not buy materially more shares. This was madness. If they were telling me it is still a wonderful company and the millions of pounds they had lost would be recovered, why would they not buy materially more shares when this amazing company’s shares were now trading significantly below the price at which they first bought them?

He did not keep any cash on the side to give him the option to top up a loser, nor did he take some profits from other positions to top up the losing ones. Most fund managers I have met seem to have an aversion to selling down or selling out of another stock to invest more money in a losing one.

Deep down they likely fear they will compound their initial mistake.