What wud you do, if u buy some stock, and its price goes down by 50%?

Question

Would you BUY more to "Average" your price or Book Loss & switch to some other better/safer stock?

Answer 1

I read your answers and some of them are very good, especially ferdinand and fathead. Everyone will run into this situation at one time or another. Many times the drop is due to having paid too much for the stock to begin with, as many people did during 1999. They might have suffered a much larger loss than just 50%. Many of those suffered losses of 90%. And they can hold the stock for ever and it will never come back to what they paid for it. I expect many are still hoping, however.

There is an old saying that perhaps could be repeated here. "Don't throw good money after bad." In general and perhaps 9 times out of 10 that is excellent advice. And for good reason. Averaging in my opinion is generally not a good idea. There are exceptions but generally no.

Why no? First because you would be concentrating more of your assets into one particular company thus increasing your risk. Not a good idea. Second because the market is telling you something about this company that you did not know. Assuming the efficient market theory has some validity, you should heed the warning.

What might be an exception? A good company with a strong market position that is currently out of favor, such as MSFT, HD, DELL, INTC, etc.

Or a total collapse of the market in general. But in that case everything will be on sale and it would be better to use the opportunity to diversify your holdings.

Now the government has given you an incentive to get rid of your mistakes in the form of a tax break for your errors. It makes a whole lot of sense to take advantage of tax break and swap out of loosing positions.

Answer 2

I can't believe I'm saying this but, listen to Fathead. You should buy stock with data that gives you confidence in your purchase. If you bought this stock on data that is obviously incorrect, sell. There is nothing in the performance of this stock to give you confidence. If you buy more stock, make it a better performing stock. Brokers will not tell you that even though the market rises, after the big funds take their share it's a losing market for most. They need hopeful money. If you cannot be sure of your knowledge then you are paying the winners in the market. The brokers love you, the insiders love you, the market loves you, and you go broke. Don't believe the hype, someone has to fuel the growth, it doesn't come from thin air, it comes from outsiders "spending" their investments, and profit comes from solid knowledge, not hunches or hopes.

Answer 3

You can:

1) Sell them at a loss and use the money you get to buy other stocks and hope they go up.

2) Wait for the ones you have to go up then sell them. In the mean time you may get paid a dividend (it happened to me, I got the dividend and the shares went up too).

3) Buy more of the same stock at a lower price. The increase you need to get to get your money back will be less than if you kept the same number of shares.

I have done all three. At the moment I am sitting on some waiting for them to go up to their purchase priuce.

Answer 4

It depends upon the stock u purchased. If u have got some really fundamentally strong shares u can "average". Otherwise it is better to book loss and get out..

Pls check out the fundamentals of the stock b'fore u decide....

Answer 5

Did you research the stock BEFORE you bought it?

This could be an opportunity to buy more.

Did the stock split?

I currently own a stock who's value dropped 50%. I knew it was a pure speculative play when I bought it. I did my research and I know that once a certain event happens this stock has the potential to double or triple in value. I just need my boy Hugo to give his blessing.

Answer 6

Hi, i know what your question means. i also think stock market is a nice place for investing.

I found some useful tips in stock trading. It includes stock basics, how to protect your profit, find a potential increase share, control and manage stock risk, when to sell/buy stock and so on.

http://www.bernanke.cn/stock-trade/

Best Wishes && Good Luck!

Answer 7

The financial of sthe company willl be studied and if there is no chance for the co., come good in two years time., I will sell at loss and invest in some other stock duly verifying its credentials and make good the loss in two years.
VR

Answer 8

You must not look at your gain or loss. You must look at the fundamentals of the stock. If they look good then you could buy more. If they don't then dump the stock. You can't be emotionally influenced by your losses. Make it an honest evaluation.

Answer 9

If some stock goes down you shout buy more and more because this time to buy. Then wait more time you can sell good price.

Answer 10

Cut your loses and invest in a stock that's going to make money.