Written by Ungku Aqeel (@ungkuaqeel418 in Stockbit)
When investing in shares, one would of course we expect the stock prices of was bought to keep rising. But in reality, that isn’t always the case, there will always be periods when your stock price will go down. It is thus, important to remember that stock investments comes with risks, one of which is capital loss. Capital loss occurs when your stock price falls and you sell the stock in a loss position.
So what to do in the event of the stock you bought had dropped?
1. Don’t panic
The most important thing when your stock price keeps dropping is to keep your composure and do not panic, do not rush to buy more just because it is cheap and definitely do not rush to sell at a loss. Take a breather, and look at the big picture (to be explained more in number 2). As a rule of thumb, the money invested into stocks should be a fraction of your disposable income. Do not go all in and invest all your money in stock. Also try to diversify by buying shares of companies from various sectors.
2. Review the company again
Before making a decision to buy more or sell your stock, review the company again. Are all the factors considered still in line with your initial analysis or has something changed? How much does this change affect the company? Are the changes significant enough to stop the operations of the company? Or will it create difficulties for the company to pay its debt? In cases of events that had negatively impact your initial thesis, it might be wiser to sell the shares of the company.
3. Ask & listen to other people's opinions
Sometimes while making your analysis, you may have missed or be unsure of somethings. You can ask other people's opinions, and you should never be afraid to do so. There will always be people who are more experienced, who are more knowledgeable / are experts in a certain area. A different perspective / angle in looking into your stocks go a long way to establish conviction in your investment call. Also listen to news / professional analysts take on both macro and micro news. Stocks sometime move irrationally based on people’s emotion, and in times like these, waiting it out is not a bad idea.
4. Buy again & be patient
When you have reviewed the company again and have gotten opinions from other investors, and the results shows that your initial thesis and the fundamentals of the company is still good, then when the stock falls lower, it is actually a good time to increase the ownership of the stock especially if you invest in the long term! Sale and bargain hunting is always the best. Now we just need to sit back, relax and wait for the market to be rational again.
A platform such as Stockbit can help in assisting you to look for other people’s views and opinions on a stock you intend to or already invest in. Stockbit gathers like minded people in the stock market together to learn, discuss and debate each other, all in good spirit, to ultimately give strong conviction on potential investment which will lead to better decision making. Join the investment community today!