Get Out of That Bad Investment

Get OutIt is always hard to let go of an investment before it is too late; this applies to all investments, be it a business, a product line, a personal investment of time, anything. There is a side of us that always thinks our bad investment could still turn around. However, that reasoning is more of a gambling mentality and not an investing one. But, even for good investors, why can it be so hard to let go?

Before we look closer at why we can’t let go, I would like to give you a simple tool to evaluate any investment and determine if it is time to let it go. First you need to know your mission (why your organization exists) and your values (what is important to your organization). Now just ask your self, does or will this investment achieve our mission and or contribute to what we value? Your gut answer to this question is probably right. As we look closer at why investments are hard to give up, I will give you examples of how this test can assist you.

In my experience there are many reason people find it hard to give up on an investment. The first two reasons are time and money invested. We find it tough to see hard costs lost when there is still some hope of return. If your organization exists to make money and you only value money, these are the only two items you need to concern yourself with. But most organization and situations are more complex then that.

The third thing that causes us to keep a bad investment is the impact letting the investment go has on people. By pulling out of the investment, people may lose their jobs, someone may lose their life work, or perhaps the investment is gear toward helping children and if you pull out they will no longer be assisted. Ask yourself, does this further our mission? If you value quality of life and your mission is to assist seniors with affordable housing you should not invest in childcare. You have to weigh the importance of your mission; you cannot please everyone so focusing your efforts is important.

Tradition can also make it difficult to stop making an investment. We can become caught up in “the way it is done” and not look to how it should be done or why it is done that way. Again, look closely at your mission. If you do need to part with a traditional investment, take time to develop an appropriate exit strategy.

The last and most important reason it is difficult to stop an investment is because the investment is yielding a positive return. No you didn’t read that wrong. Just because an investment is doing well, doesn’t mean it is the right investment. As before, you need to consider your mission, and in some cases the investment will positively impact your mission? In this case you also need to consider if the investment is maximized. Could those resources make an even greater impact for you mission if they were invested differently.

Let me encourage you that often the right decision is the hardest one to make.

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3 Responses to “Get Out of That Bad Investment”

  1. Jack Payne Says:

    Why is it that this is just about the toughest for an investor to do–divorce himself from a poor intestment?

    Never could understand this, why emotion takes control.

  2. alex Says:

    Very cool site!

  3. IRA Investing Says:

    IRA Investing…

    From my experience the best investors are mature in their thinking and have realistic investment expectations. They measure their personal investment horizon in months and years - rather than weeks or days….

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