Disposition effect

Most investors have an affinity for selling winners. It feels good. It builds our confidence and gives us something to brag about for years.

In fact, we’d rather sell an investment that’s made money — likely continues to make money — than suffer the pain of selling a loser. So we hold onto the loser with the hopes that it breaks even.

The blunder of selling winners too soon and holding losers too long is known as the disposition effect. It’s one of the biggest mistakes investors make.