Learn from your mistake and diversify portfolio

Q: I’ve lost 50% on two stocks. What now?

A: Now you know the risk of buy-and-holding individual stocks. The best thing to do now is to not repeat this mistake.

In your note, you explained you’ve lost more than half of your money on computer chipmaker Advanced Micro Devices and also video-game maker Zynga. Both of these stocks have been wealth shredders. You paid $6 a share for AMD, which is now trading for about $2 a share. And you paid $4 for Zynga, which is trading for about $2 a share, too.

When you’re down this much on stocks, there’s not really a happy ending. A tax preparer would suggest you sell the stocks by the end of the year so you can at least take the capital losses for this tax year.

Just remember you’ll have to wait more than 30 days before you buy them back — although it’s hard to imagine why you’d want to own them again — or you risk triggering the wash-sale rule and precluding you from taking the loss.

The key is learning from this mistake. When buying individual stocks, you are speculating and need to behave accordingly. Selling individual stocks when they fall more than 10% from your buy point is a good adage. Otherwise, diversify by buying a broad index. That way you can buy-and-hold as your risk is spread over a variety of companies and sectors.