Capital Allocation Psychology – Profit booking / No loss booking and Averaging

A largely prevalent Investor / Trader psychology is to make gains in every script in the portfolio (even if assessing returns on investment on the whole portfolio).

So these investors / Traders are quick to book profits on positive movement in certain scrips and also endlessly wait on scrips with a negative movement, sometimes also making additional investment in those scrips with negative movement (Averaging).

My short point is from a Capital Allocation perspective, this psychology, leads to a scenario where the capital allocation tends to be 

1. Deficient in performing stocks due to continous exits due to profit booking while

2. at the same time being excessive / increasing in laggard stocks due to loss averse non-exiting & possibly averaging (additional investment).

Repeating this prevalent strategy / psychology, over time, we see a crowding of under-performers in the portfolio.