When director deals matter

No-one likes selling at a loss. That includes board members. So when directors swallow a loss, it’s bad news.

922_MW_P16_Strategy

One behavioural quirk that almost every investor has experienced at some point is a deep reluctance to crystallise a loss. We all know it's a big mistake, and yet we all make it. We take a look at the psychology behind what's been named the "disposition effect" in the box below. But the key point is that it's painful, whoever you are and however canny an investor you are, to sell shares when it means acknowledging that you have taken a hit as a result. None of us makes the decision comfortably, and many of us put it off until we feel we have no other choice.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.