Buy and Hold even when share price drop. Will i make a loss?

Question

If i were to buy 100 shares of XYZ @ $10 each and hold.
And the price drops to $5 each.

Noting that i did not sell the shares but rather just hold on to it,
will i make a "LOSS" of $5 on each share totalled being $500?

or

there won't be any change. Except for the new price of my share.

Answer 1

For tax purposes there is no loss until you sell. For your performance evaluation, there is definitely a loss. Your assets are not worth as much as they were and your net worth has fallen. It is just a fact of life.

On the other side of the ledger, if the stock were to go up to $20 a share, there is no gain for tax purposes until you sell, but your net assets has increased and your net worth also.

Another way to think of the situation, is to think that the stock is in a margin account and the stock was bought on margin. If the stock drops to 5 from 10 you will receive a margin call. If however the stock rises from 10 to 20, you now have additional margin that you can use to buy more stock.

Answer 2

The value is determined if you sold your shares at that moment. Your portfolio would have a loss, but until you sell those shares your just hoping and praying that the price will return to $10. If you believe in the company then you should buy more shares and help offset your price per share. Also known as dollar cost averaging.

If you buy another 100 shares at $5 and you've now spent $1500 on 200 shares or an average of $7.50 per share. Now when it returns to $10 your portfolio will have a $500 increase. When it reaches $15 you sell 100 shares and use that money to buy 100 shares of ABC @ $10, keep $500 cash to collect interest and now your portfolio is diversified. Repeat this cycle often enough and your portfolio will grow into a nice retirement nest egg.

Answer 3

If you sell it at $5, it's a loss.

If you're still holding it, it's only a paper loss. You don't lose money out of pocket until you sell it. So if you continue to hold it and it goes up to $10, your stock is now worth $1000 again. And if it goes to $12/share, it would be worth $1200. You're ahead $200 at that point, but only on paper since you did not sell it. No money changes hands.

So at $5, that doesn't mean that the loss isn't real. It's just not been realized! What that means is since you own the stock, your stock is now worth $500 now instead of $1000. You paid $1000 out of your pocket for it (or someone did). If you sell it now, then you only get $500 back (less commissions).

Now if you bought the shares on Margin and put up $500 for the $1000 worth of stock, that would be a different story. But you didn't ask that!

If you have any other questions, let me know.

Answer 4

I don't think it matters. The price is relative. For example if a company has a stock split at $50 to $25 they just double the shares outstanding from 1,000 to 2,000. That is to say the company is "worth" the same, and its just the price of the shares which changes. Also, if you invest $1,000 in a company you still invest $1,000 in that company, regardless of the share price. I really don't think the price of a share is too important, unless its so high you can't afford even one share.

Answer 5

=.= STRAIGHT AND SIMPLE, YOU ARE HAVING A UNREALIZED LOSS~!!!! and it is a BAD investment if your stock drop by like 50% in value!!!

Answer 6

No, you'll be rich. What the heck kind of a question is this?