How I lost $5k to save $15k

Have you heard of Rule #1? For those of you who don't know it was made famous by no other than my idol Warren Buffett. He basically said that rule #1 in stock investing is "Don't lose money." and rule #2 is "Don't forget rule #1." It sounds simple enough and yet cutting losses is probably one of the hardest thing to do in stock investment and I am guilty of often violating this rule #1 myself too. One of the things I do routinely every night is to read the IBD (Investor's Business Daily) that I subscribe to. For anyone who reads IBD you know of all the investment advises they give cutting losses at 7 % to 8% is the rule they stress on the most. The reason of cutting loss early is because it is much easier to make it back. If you wait until your stock is down 15%, 20% or even 50% it would be much harder to recover from it. The stock market has been dropping badly in the past 2 weeks of trading. I was forced to close my position at a loss of 7% on two of my recent purchases. I lost about $5,000 and I was kind of upset about it. Now that when I look back, I'm glad that I did what I did. If I were still holding on to those stocks my loss would have been magnified to $15,000! Although I still consider myself to be a "buy-and-hold" investor as I do not move in and out of a stock to make tiny profits. In today's chaotic market we all need to move quickly to cut loss and protect our capital, and hence following the rule #1 "Don't lose money."

Do I have what it takes to be a successful investor?

This past weekend I spent a whopping whole 3 days attend Ron LeGrand's Cashflow Summit 2009 seminar at the Radisson hotel in LAX. I have been to many events like this one which is essentially a live infomercial of each different speaker's products such as seminar training or software. All of them were wonderful speakers making it "almost" irresistible to buy their products. Well I didn't buy any of their stuffs but I've learned a great deal of things in these 3 days and I plan to study further by reading them on the internet or in books. Anyway while I had a great time attending this free seminar/live infomercial I also realized I'm a minority among my friends and family. What do I mean by that? I found people are often unwilling to sacrifice their time to learn anything about investment. They might be interested in hearing about it, but when they are asked or presented with opportunity to actually take action they often shy away. Perhaps they are being skeptical or they don't want to give up their weekend which is all understandable. After all I too thought it was kind of crazy to wake up before 6am everyday driving all the way to LAX and then stay until 5pm before come home. As crazy as it sounds I did it. I sat through all the presentations and took notes. I came home at night and researched on some of the new things I learned that day. I could have spent the weekend with my family but instead I left them home and went to this seminar. I may still be a long way from the top but I believe I have the determination to get there and become a successful investor one day.