Taking the loss

In his recent post, Roger Nusbaum says that taking a loss quickly -- as suggested by Jim Cramer -- is not always a good idea.

Nusbaum says that much depends on whether the investor has a short term or a long term orientation. Here, I would add that studies show that while stocks display momentum over a period of up to about one year, they tend to reverse over longer periods.

Nusbaum also says that the need to stay diversified also means that an investor may have to remain in sectors that are not performing, as is the case currently with technology.

"I think the article justifies a short term approach for anyone who reads it but not every investor is short term," Nusbaum writes. "This will cause the average person to end up chasing heat and over trading their account. This is unlikely to result in better returns."

I can't agree more with Nusbaum.