Experienced and successful investors know that their investment wealth faces two powerful enemies at all times: bad investments and capital gains taxes.
Invest long enough, and you will inevitably encounter an investment that could have, would have, should have — but didn’t — appreciate in value. Even Warren Buffett has picked the occasional clunker in his long and legendary career, but by cutting losers short, letting winners run, and paying close attention to position sizing and diversification principles, no investor needs to be crippled by any bad investment.
