Are Your Investments Losing Money? This Is Often Your Best Move

It's the biggest fear of any investor: You pour a bunch of your hard-earned cash into a company's stock, hoping for big gains, only to watch its value plummet. It's something that happens to just about everyone at some point, but people handle it very differently.

Some panic. They sell as soon as they can to avoid future losses. But seasoned investors know there's a better way.

When you notice your investments losing money, your first step should always be to review your portfolio and ensure it's adequately diversified. If you only own 10 stocks and they're all in the tech sector, that's problematic because any issue that hits the industry hard could drastically affect your entire portfolio. If you don't think you're diversified enough, consider buying other investments or selling some of what you have to invest elsewhere.

If your portfolio is diversified, but some of your investments are consistently losing money, take a closer look at them. Don't just focus on recent performance. Every company has bad quarters. Think about how you expect the company to perform over the next five or more years. If you question its growth potential, that could be a cause to remove it from your portfolio.

But if you expect the company to do well over the long term, then your best move is surprisingly simple: Do nothing. There's a good chance your investments will rebound if you just give them time. If you sell, you're locking in your losses and missing out on all that future growth.

This can be difficult for some people, though. If you're one of them, consider setting a limit on how often you can check your accounts. It's easier to stay the course when you're not watching your portfolio's value shrink day after day.