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5 bad financial decisions and how to recover

Investing » 5 Bad Financial Decisions And How To Recover

Hanging on to an investment for too long
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Just like a boxer needs to learn how to take a punch, investors must eventually learn to take a loss. Not every investment will be a winner. It takes emotional discipline to recognize the mistake and cut your losses.

"If it just stinks and is never coming back, don't hold onto it for 10 years trying to make your money back, because you may never get it," says Panaccione.

How to recover: Instead of hanging onto a dead investment, take the tax write-off provided by a capital loss when it makes sense for your overall tax picture. Bankrate's story, "Use capital losses to cut taxes," explains the tax considerations of deciding when to sell a security.

"If people are taking a risk on an investment, they may as well do it in a taxable account where they can take advantage of the tax write-off. If it goes screaming up you might get taxed on it, but I don't think you'll mind if you make a ton of money. On the downside, you don't want to have it tank and miss the write-off because it's in an IRA," Panaccione says.


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