When you board a train to reach a destination, you know where to exit even before you board the train. Following are the 4 possibilities in your train journey towards destination.
1. If train keeps moving towards your destination, you just sit patiently and you shall reach your destination.
2. If train brakes down during the journey, you exit the train.
3. If you board a wrong train, you exit the train.
4. If train starts moving into opposite direction of the destination for whatever reason, you just exit the train.
We find it easy to exit a wrong train because we have seen that through out our life and it works fine always.
Similarly, when we make an investment, we need to know when to exit before we make the investment. Following are 4 possibilities in our investing journey.
1. If investment is moving as per the plan, we need to just sit patiently and we will create wealth.
2. If investment goes wrong for any reason after we invest, we should exit the investment.
3. If we realize that we made a wrong investment, we should exit the investment.
4. If investment starts moving into opposite direction of our plan, we should exit the investment.
We need to define the exit strategy. Keep sitting on a bad investment won’t yield positive outcomes and similarly exiting good investments too early won’t create the wealth.
“Timely exit is important in all walks of life to reach to our destination and investing is no different.”