Loss aversion

One of my friend is risk adverse. He said he does not want to lose money because of my previous unpleasant experience. He would sell stock for some profits and waiting for another low point to entry. We can describe this behaviour as Loss aversion. People tends to feel more painful for $1 loss than feel joy in $1 gain.

However, for retail investor, it is unlikely to accumulate sizeable asset by this method. Frequent in and out of the market, would let the trading cost erode the return and let the recurring unexpected event cause you to lose more money.

My idea is to pick a good company with good people, wait for low entry point, hold for long term. If you have done the home work, in few years time, the pay back could be bigger than the frequent buy and sell. Forget about the economy and crises, stock would do well as long as the company is doing well.