Hi guys, I’m interested to hear what you think of this as I’m stuck with how I want to move forward with a few of my stocks.
Essentially there are a couple of stocks in my portfolio that I bought a while ago at a pretty high price compared to what they are valued at now (currently at a 68% & 73% loss on both). I bought these when I was very new to investing and have come to the realisation that they may never go up to where they were when I bought them.
My question is, do I accept the loss, sell them and move on? or do I hold? Even though I’m pretty confident that I’m never going to fully get my money back.
1 option I would consider for myself would be to average down. Depends on many factors but that has help keep some of my positions alive. I took Nio from a $44 average to $38…$28…$22 and at $20 currently, $1.50 dollars per share down.
If I hadn’t been averaging down, i’d be far off. It all depends of how much you hold and how much you have to spend and if you stock actually is a good investment or a trash meme stock in the first place.
My opinion in the companies has changed over the last 6-9 months, after carrying out more research into them and looking into financial reports etc. these companies aren’t as good as I originally thought they were and whilst they may grow over the next few years, I just don’t feel particularly confident that they will grow to levels they were previously.
That is a rather broad question. To get the right decision get back to the time when you initially started those positions.
Then think why did you do it, what was the time horizon you had when you bought them and what was the reason you bought them.
Has anything changed fundamentally with the companies since you bought them? If the only thing that is different from back then is the share price then there shouldn’t be a reason to change your initial plans just based on that.
If you bought them without a clear idea and just on emotions, then it would be wise from you to step aside for a bit, educate youself and then come back and get into investing with a clear idea and a goal in mind. Then the temporary share price wouldn’t matter to you.
Obviously there are many more things in play and I cannot give you a good answer in a relatively short response and everyone’s situation is different. But that’s broadly how you should be looking at investing, especially if it is something you want to get into for the long run.
I cannot advice you anything neither I will, but it would be a good starting point to start looking at stocks outside of their share price and look them as businesses and value them on the business side and prospects.
Hope this helps, the only one that can answer the question on wether you should buy, sell or hold is you in the end of the day as we are all different and have different goals, time horizons and views of the world in general.
There is an opportunity cost to holding onto losers. There might well be something else better you could invest that money in. If you are confident they will never go back up you should sell and invest the money in something that you do think will go up.
You will see people on forums saying you haven’t lost until you sell, but that is a fallacy. If it never goes back up then you absolutely have lost something even if you hold forever.
This is called loss aversion. people are reluctant to admit they were wrong and take even a small loss. But everyone makes mistakes. You should learn from it and move on
Yeah I agree with that, the other major problem with it is you are increasing the amount of exposure to a stock that hasn’t performed like you thought it would. this is very risky. If it falls further your overall loss will be bigger.
It comes down to the stock and making sure you have done your own DD. Risky…but its all risky, TSLA was $1000, dropped to $850…if you bough in at $1000 and averaged down when at $850 you would be adding to your loss…
TSLA is back to $1045…its all relative and many different examples of wins and loses with average down.
Edit: meant averaging down, not dca, the 2 main things I wanted to push:
Averaging down can work but only if you have done your own DD and its decent.
Has the business been performing poorly which has led to a large drawdown?
Is this poor performance caused by macro environment only? If yes then consider how long you can suffer
Or is the business genuinely doomed because of poor management/execution? Sell and move on
Has the business been performing well but still suffered a large drawdown?
It’s hard to see a reason to sell if you still believe in the business long term. It could be a good idea to add to your holding if your time horizon is long enough.
Even though it worked out in that case, you have increased the amount of money at risk. DCA isn’t the same as averaging down. There’s a subtle difference. DCA is regular investments to build up a position over time without experiencing detrimental effects from volatility. You would have planned to do this from the start.
Averaging down is trying to rescue a losing position by putting more money in after you original investment goes south. This is usually an emotional response to loss aversion
When I purchased these stocks (C3.AI & Fiverr) I didn’t do enough research on either and bought them when they were at their peaks essentially. My thinking for C3 was that “it’s an AI company, AI is going to be everywhere in 5-10years” without actually looking at the company itself.
Fiverr I think was attractive to me because of the pandemic, I have a few friends who used it during lockdowns and I thought this would be the future of people working in that kind of industry…again without actually delving into the company that much.
The problem is that even when you delve into these companies, you’re likely not qualified to judge if they are good companies or predict the future of the macro environment for them. None of us are.
Just buy funds as your main holdings.