Comments on: Should I Sell My Stock after It’s Lost 50%?

By: arthur

arthur — Sat, 24 Sep 2011 23:14:13 +0000

One should approach investing in a company’s stock no differently that investing in rental property. A person should only buy optionable stock and only after doing research to confirm sound company fundamentals. The motivation for buying the stock, in my opinion, needs to be to produce an income stream by “renting out” the stock each month via covered call sales – verses the speculative approach most investors take in buying a stock and hoping and praying it goes up. In this case, I believe the subject of the above article should only sell her stock (at a loss) if it is not optionable. Otherwise, she should keep the stock and begin producing an income stream by selling covered calls against the stock each month. Afterall, you wouldn’t buy a piece of real estate to rent out and then think you all of a sudden have to sell the property, one month, just because the value of the property has declined to less than you paid for it – no, you would continue collecting rent on the property, realizing that like stocks, the value of real estate goes up and down.

By: iheartubuntu

iheartubuntu — Wed, 07 Sep 2011 08:06:08 +0000

Also can I add… never under any circumstances listen to anyone on the internet! Do your own research. Erik above me said not to buy gold since it was at an all time high. Back when he said it gold was at $1100 an ounce. Now its around $1850. The person asking the question could have put all of his remaining $7k into gold, sat for a year and now be up $5000, almost recovering all of his money. Im sure gold isnt at its high point yet. Im sure silver would have done well too. Silver goes into all cellphones, smartphones, laptops, etc. And with the advent of the ipad and other similar devices breaking records… silver wont be going down in price any time soon either.

For me its diversification and research. Gold, silver, and other upward trending stocks.

By: Erik

Erik — Fri, 14 May 2010 17:31:42 +0000

Several things: First, Neal you’re right about having a strategy. If this investor is clueless, it’s time to use this ‘loss’ (paper for now) as a motivation to learn, strategize, and follow-thru.
Second, I would not take the strong position to either ‘never sell at a loss’ or ‘buy more’. If the company is going down the toilet (i.e. typewriter manufacturer) then by all means gets out before you lose ALL $7000. But if it’s just part of the general malaise affecting the economy, ride it out. I would not put more into it at this time personally. This person does not sound like he/she should be targeting single stock investments since they make him/her into a nervous nelly when the market drops. Mutual funds — or anything more diversified — at least minimize the bit, usually (except for 2008…yuck!).
Third, don’t invest in gold now. It’s at an historically high price. Wait until it gets cheap, then consider it as a small portion of an overall strategy.
Gold is not a part of my strategy, and this is why: It appears lately that gold has been bid up by fear of inflation. If we see hyper inflation, gold won’t save me. I can’t eat it, can’t living in it, can’t wear it, and it’s a pretty bad way to conduct commerce. Most people do not have the expertise to evaluate how much gold is worth, and in a hyper-inflating market the value will be changing constantly. At some point you have to convert it into cash (at which time you lose your hedge against inflation) or chop it into small pieces. Then you have to find someone willing to trade for it. Why would I take gold in exchange for 20 gallons of gasoline? or a gallon of milk? or a shot gun? THOSE are the items you’ll need if hyperinflation runs wild. Plus, even if you can find someone who will actually trade, will they or you know how many gallons of milk your gold is worth? Who will evaluate it’s authenticity, weight, purity?
Simply put, gold can be part of a strategy, but I see it as a small portion for people who have money to lose and who bet on it short term. Your investor doesn’t sound like the type of person who would benefit.

By: Nunzio Bruno

Nunzio Bruno — Thu, 13 May 2010 23:35:44 +0000

Selling at a loss can be beneficial in some circumstances. There are tax advantages like being able to offset gains in other parts of a portfolio. So the blanket “never sell when you’re down” is a slippery slope. I agree with everyone that hit points on a strategy of plan. Going in if you set yourself up with parameters or a trading system then stick with it..it’s just like a casino, when you go in with a predetermined amount that you are comfortable losing and that’s it then the casino won’t take your shirt..and you won’t chase. Buying and selling mean very different things to different people which is why having a plan and evaluating why you were in the position in the first place is important…not to mention no one like cost basis headaches lol.

By: Len Currie

Len Currie — Thu, 13 May 2010 18:35:20 +0000

The advice in which I would supply this investor is to invest more into it!

But that’s taking for granted there was a good fundamental reason for buying it in the first place and those fundamentals haven’t changed.

If they have, well sell – but if they haven’t.. take this opportunity to dollar cost average yourself into a better position.