As an investor, we should always be eager to learn from those around us. But have you ever heard of the saying, “Paper losses aren’t real losses until you sell.” Paper losses, or unrealised losses, are losses that have not been realised. This is incurred when the price of an asset has fallen after its purchase but has not been sold. Specifically in the context of stocks: Let’s say, Johnny purchases 100 shares of Carnival Corp, a cruise company, in Jan 2020 at USD 40 per share. Assuming no commissions, this investment is valued at USD 4,000. However, soon after he buys the shares, the price falls over the next few months due to the Covid-19 pandemic. Today the shares trade at USD 28.00 per share. As such, he has incurred a paper loss of USD 1,200. Should he:

1. Cut the loss and move on
2. Hold until it recovers

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