Good morning.

My column last weekend, "How to Make Peace With Your Stock Market Losses," shared some thoughts on figuring out when — and how — to let go of losing investments. 

I liked this comment:

I've always felt that people who buy individual stocks should track the performance of their hold portfolio (the stocks they still own) and their sold portfolio (the ones they don't).

To learn, you need good feedback, and you can't get any from outcomes you never observe or measure. In my experience, even most professional investors don't track the returns of the assets they sell after they sell them. That needs to change.

As always, readers are asking themselves the right questions:

Reader Bryon Burgess emailed me with a wise distinction between single stocks and the market as a whole:

     I have learned that when and what stock to sell is one of the hardest challenges I face as an investor. I learned a hard lesson a long while ago when I rode a (supposedly) blue chip stock, Washington Mutual, to bankruptcy hoping that it would recover. That lesson helped me to cut my losses with two other supposed blue chip stocks, GM and GE. Even though I lost some money on those stocks I feel very good about knowing that I could have lost much more.
     However, I think there is a big difference between selling an individual stock and selling the "market" itself. I have a large number of individual stocks and I also have broad-market index funds. I will look at selling individual stocks, but I am keeping my index funds and only adjusting when my asset allocation gets out of whack.

When markets are down, you probably should sell some of your losers, which can reduce your tax bill. My colleague Laura Saunders has some excellent pointers on tax-loss harvesting here. Converting a traditional Individual Retirement Account to a Roth IRA can also make sense during a bear market.

It's good to buy and hold, but you don't have to use a death grip.

In the fourth of our series on the origins and history of financial lingo, let’s look at where the word stock comes from. (The first in the series explored the gastrointestinal roots of the word inflation; the second, the derivation of cash; the third, how fee is related to livestock.)

With shares down roughly 23% this year, it might feel to you as if our word stocks came from this wooden structure:

And you wouldn't exactly be wrong!

Many meanings of the word stock are rooted in the Old Teutonic stukko, which meant a tree or piece of wood. As early as 862 it appeared in Old English as stocca or stocce.

Stocke described a stem or trunk in which a graft, or transplanted twig, is inserted — the same sense in which arborists use the term "root stock" today.

The word stock, as a financial term, entered English to describe a piece of wood used to record transactions as early as the 12th century.

A stock was part of a tally, a small strip of hazelwood or willow upon which a borrower and lender, or a buyer and seller, would have distinctive notches cut across the grain to denote how much money was at stake.

The piece of wood was then split lengthwise, with the grain, so both pieces still bore part of all the notches.

Each party kept one of the two pieces: The buyer or borrower held the smaller, thinner part of the tally. It was called the foil, counterfoil or counterstock.

The seller or creditor kept the larger, heavier portion of the tally. It was called the stock.

At final payoff, the two pieces would be rejoined to make sure the notches lined up or "tallied"— the medieval equivalent of entering a PIN or password.

All these terms are related to trees: Tally is from the Latin talea, a slip or cutting of wood. Foil means "leaf" (think of foliage).

British investors called bonds "stock" at least into the 19th century, when the Exchequer still used tallies. Buyers of government securities could receive proof of their investment in the form of wooden stocks — whose appearance had barely changed in half a millennium.

At maturity, bondholders could "present their stock," bringing their strip of wood to the Exchequer, where officials would find the foil, join it to the stock and pay off the principal.

Tallies were transferable, so the stocks changed hands many times, a wooden form of money. 

Not until 1834 did the British government finally get around to destroying all the tallies it had kept for centuries.

Piled up to the ceiling in a storage room in the House of Lords, the tallies were tossed en masse into the furnace used to heat Parliament.

Perhaps because many were oiled from the touch of hundreds of hands over hundreds of years, the tallies burned with unexpected ferocity.

The furnace flues overheated, igniting the paneling. The Houses of Parliament went up in flames, in one of the worst urban fires of the 19th century:

All this is a reminder that we would be better off as investors if we thought of stocks as trees, which linguistically they are!

The rings of a tree stump are regression to the mean rendered visible: Better-than-average growth years, when the rings are full and wide, often come several at a time, only to be followed by a stretch of leaner-than-usual years.

Stocks are the same.

Think of what else is rooted in stock and its origin as a word for tree.

Try to watch a tree growing, and you see nothing; yet it is growing all the same. It can send out new branches and green foliage for several human lifetimes. Prune it back properly, and you make it stronger.

Stocks are the same.

But stocks, as the fire at the British parliament shows, are also highly flammable. Treat them carelessly, and they can destroy your portfolio.

And let's remember: The word portfolio means "a bundle of leaves"!

If you think I'm a little too obsessed with this topic, you might be right. After all, Zweig is the German word for twig.

In the last issue, I made a data-transcription error that omitted two decimal places off the monthly returns in a chart. Here's the corrected graphic:

I also wrote:
The bear-market protection of this CD would have given you piece of mind at the beginning and a less-than-ideal return at the end....

In response, reader Kyle Prochno made me laugh with this email:
I just wanted to drop you a quick note that the proper phrase is "peace of mind," as in tranquility. I hope you don't take offense to me giving you a "piece of my mind."

Be well and invest well,

Jason

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Rabbi Uri of Strelisk taught: “Man is like a tree. If you stand in front of a tree and watch it incessantly to see how it grows and to see how much it has grown, you will see nothing at all. But tend to it at all times, prune the runners, and keep the vermin from it, and — all in good time — it will come into its growth. It is the same with man: All that is necessary is for him to overcome his obstacles, and he will thrive and grow. But it is not right to examine him every hour to see how much has been added to his growth.”
—Martin Buber