Holding On To A Loss-Making Share? How Ah?

Waiting To Break Even Can Erode Your Investment Returns 

If one spends a little bit of time calculating what that means, he would have come to the realisation of the difficulty of it. Basically, for every percentage a stock price decreases, it finds itself with a higher mountain to climb to break even.

The Stock You Bought Does Not Care About How Much You Paid Per Share

This is not to say that a rebound is impossible.

The stock you bought does not know how much you paid per share, neither does it care. Hence, your personal gain or loss is entirely your own responsibility. In a perfect world, investors will always try to achieve the objective of selling a stock at the highest price and buying at its lowest, but this is not always possible in real life.

If one is familiar with the factors affecting stock prices, he will realise that past prices of the shares are not a factor that affects future price of stocks.

Read also: 4 Forces That Move A Stock Price

Questions To Ask Yourself

Now that you understand the two facts stated above, the decision to sell or hold on to the shares boils down to a few questions. While answering these questions, one needs to detach himself emotionally and look at the numbers and facts behind the shares he bought.

• What indicators or numbers did you look at that resulted in you purchasing the stock?

Recommendation from friends or forum should never be one of the reason!

• There is usually a reason for any change in price to the stock. What changed ever since you bought the stock, resulting in the changes to the indicators you were using?
• Will you still be keen to invest in the company, having looked at the new figures? Is there any good reason to continue holding on to the stocks? If not, maybe it is time to sell it.

Read also: 2 Stocks With Good Dividends History

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