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Is it wise to hold on to stock that has plummeted and then stabilized?
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I own some stock that lost more than half its value. It has now been more or less stable for months, and I'm tempted to get rid of it because I see poor prospects in the future for this line of business.
However, I'm told by others that this is unwise, that this is the worst time to sell -- I should recover the losses!
Isn't this the gambler's fallacy? What stops the stock from going down by another half in the future, again? And again?
The people giving me this advice have no insight at all into this particular stock nor have a particular keen insight into economics in general. However, they present this as if it is obvious fact that everyone should know, that if you have experienced this, then you should wait until it has regained at least some of its value.
What basis would anyone have for this statement? Is it true that statistically, more often than not, a company will recover?
The way I view this, is if I would rather buy or sell stock in the company now. What happened in the past is simply unfortunate (for me), it by itself doesn't have any bearing on the future for this company.
investing
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
I own some stock that lost more than half its value. It has now been more or less stable for months, and I'm tempted to get rid of it because I see poor prospects in the future for this line of business.
However, I'm told by others that this is unwise, that this is the worst time to sell -- I should recover the losses!
Isn't this the gambler's fallacy? What stops the stock from going down by another half in the future, again? And again?
The people giving me this advice have no insight at all into this particular stock nor have a particular keen insight into economics in general. However, they present this as if it is obvious fact that everyone should know, that if you have experienced this, then you should wait until it has regained at least some of its value.
What basis would anyone have for this statement? Is it true that statistically, more often than not, a company will recover?
The way I view this, is if I would rather buy or sell stock in the company now. What happened in the past is simply unfortunate (for me), it by itself doesn't have any bearing on the future for this company.
investing
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
1
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
2
There's your answer.
– jcm
5 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago
add a comment |
I own some stock that lost more than half its value. It has now been more or less stable for months, and I'm tempted to get rid of it because I see poor prospects in the future for this line of business.
However, I'm told by others that this is unwise, that this is the worst time to sell -- I should recover the losses!
Isn't this the gambler's fallacy? What stops the stock from going down by another half in the future, again? And again?
The people giving me this advice have no insight at all into this particular stock nor have a particular keen insight into economics in general. However, they present this as if it is obvious fact that everyone should know, that if you have experienced this, then you should wait until it has regained at least some of its value.
What basis would anyone have for this statement? Is it true that statistically, more often than not, a company will recover?
The way I view this, is if I would rather buy or sell stock in the company now. What happened in the past is simply unfortunate (for me), it by itself doesn't have any bearing on the future for this company.
investing
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
I own some stock that lost more than half its value. It has now been more or less stable for months, and I'm tempted to get rid of it because I see poor prospects in the future for this line of business.
However, I'm told by others that this is unwise, that this is the worst time to sell -- I should recover the losses!
Isn't this the gambler's fallacy? What stops the stock from going down by another half in the future, again? And again?
The people giving me this advice have no insight at all into this particular stock nor have a particular keen insight into economics in general. However, they present this as if it is obvious fact that everyone should know, that if you have experienced this, then you should wait until it has regained at least some of its value.
What basis would anyone have for this statement? Is it true that statistically, more often than not, a company will recover?
The way I view this, is if I would rather buy or sell stock in the company now. What happened in the past is simply unfortunate (for me), it by itself doesn't have any bearing on the future for this company.
investing
investing
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
edited 5 hours ago
AlphaCentauri
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
asked 5 hours ago
AlphaCentauriAlphaCentauri
1062
1062
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
AlphaCentauri is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
1
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
2
There's your answer.
– jcm
5 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago
add a comment |
1
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
2
There's your answer.
– jcm
5 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago
1
1
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
2
2
There's your answer.
– jcm
5 hours ago
There's your answer.
– jcm
5 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago
add a comment |
2 Answers
2
active
oldest
votes
This might be closer to the sunk cost fallacy with a bit of loss aversion thrown in. I know it is hard emotionally to "lock in your losses", but that money is gone and it is a new day. You have an asset that is worth what the stock trades at today and that's what you have to work with.
It is very possible that stock might regain its previous losses, but the fact that you paid more for it doesn't make it any more/less likely to than any other stock.
The key is that you have to pretend that you have the cash value of the stock today and never invested it. If you would buy that stock today, keep it. If you wouldn't trade the same amount of cash for the stock, try something else.
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
add a comment |
Losses on stock are NOT valueless- in the USA you can write-off those losses against income (gains made in other stock transactions, or in your salary) when you file your taxes, which will lower your taxable income and possibly even move you into a lower tax bracket (further reducing your taxes).
The more money you've lost, the greater the benefit.
Carefully timing your sales-at-a-loss can thus be beneficial to your taxes on a given year.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
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2 Answers
2
active
oldest
votes
2 Answers
2
active
oldest
votes
active
oldest
votes
active
oldest
votes
This might be closer to the sunk cost fallacy with a bit of loss aversion thrown in. I know it is hard emotionally to "lock in your losses", but that money is gone and it is a new day. You have an asset that is worth what the stock trades at today and that's what you have to work with.
It is very possible that stock might regain its previous losses, but the fact that you paid more for it doesn't make it any more/less likely to than any other stock.
The key is that you have to pretend that you have the cash value of the stock today and never invested it. If you would buy that stock today, keep it. If you wouldn't trade the same amount of cash for the stock, try something else.
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
add a comment |
This might be closer to the sunk cost fallacy with a bit of loss aversion thrown in. I know it is hard emotionally to "lock in your losses", but that money is gone and it is a new day. You have an asset that is worth what the stock trades at today and that's what you have to work with.
It is very possible that stock might regain its previous losses, but the fact that you paid more for it doesn't make it any more/less likely to than any other stock.
The key is that you have to pretend that you have the cash value of the stock today and never invested it. If you would buy that stock today, keep it. If you wouldn't trade the same amount of cash for the stock, try something else.
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
add a comment |
This might be closer to the sunk cost fallacy with a bit of loss aversion thrown in. I know it is hard emotionally to "lock in your losses", but that money is gone and it is a new day. You have an asset that is worth what the stock trades at today and that's what you have to work with.
It is very possible that stock might regain its previous losses, but the fact that you paid more for it doesn't make it any more/less likely to than any other stock.
The key is that you have to pretend that you have the cash value of the stock today and never invested it. If you would buy that stock today, keep it. If you wouldn't trade the same amount of cash for the stock, try something else.
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
This might be closer to the sunk cost fallacy with a bit of loss aversion thrown in. I know it is hard emotionally to "lock in your losses", but that money is gone and it is a new day. You have an asset that is worth what the stock trades at today and that's what you have to work with.
It is very possible that stock might regain its previous losses, but the fact that you paid more for it doesn't make it any more/less likely to than any other stock.
The key is that you have to pretend that you have the cash value of the stock today and never invested it. If you would buy that stock today, keep it. If you wouldn't trade the same amount of cash for the stock, try something else.
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
answered 2 hours ago
JohnFx♦JohnFx
35.7k984187
35.7k984187
add a comment |
add a comment |
Losses on stock are NOT valueless- in the USA you can write-off those losses against income (gains made in other stock transactions, or in your salary) when you file your taxes, which will lower your taxable income and possibly even move you into a lower tax bracket (further reducing your taxes).
The more money you've lost, the greater the benefit.
Carefully timing your sales-at-a-loss can thus be beneficial to your taxes on a given year.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
Losses on stock are NOT valueless- in the USA you can write-off those losses against income (gains made in other stock transactions, or in your salary) when you file your taxes, which will lower your taxable income and possibly even move you into a lower tax bracket (further reducing your taxes).
The more money you've lost, the greater the benefit.
Carefully timing your sales-at-a-loss can thus be beneficial to your taxes on a given year.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
Losses on stock are NOT valueless- in the USA you can write-off those losses against income (gains made in other stock transactions, or in your salary) when you file your taxes, which will lower your taxable income and possibly even move you into a lower tax bracket (further reducing your taxes).
The more money you've lost, the greater the benefit.
Carefully timing your sales-at-a-loss can thus be beneficial to your taxes on a given year.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Losses on stock are NOT valueless- in the USA you can write-off those losses against income (gains made in other stock transactions, or in your salary) when you file your taxes, which will lower your taxable income and possibly even move you into a lower tax bracket (further reducing your taxes).
The more money you've lost, the greater the benefit.
Carefully timing your sales-at-a-loss can thus be beneficial to your taxes on a given year.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
answered 2 mins ago
Jaime GuerreroJaime Guerrero
1
1
New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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New contributor
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Jaime Guerrero is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
add a comment |
AlphaCentauri is a new contributor. Be nice, and check out our Code of Conduct.
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AlphaCentauri is a new contributor. Be nice, and check out our Code of Conduct.
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1
If you didn't own any of this stock, would you buy some now?
– jcm
5 hours ago
@jcm No, and that was my point.
– AlphaCentauri
5 hours ago
2
There's your answer.
– jcm
5 hours ago
As you stated, (1) nothing stops the stock from going down by another half in the future and (2) what happened in the past has no bearing on the future for this company. Your choice is to continue Buy & Hope or accept defeat. Regardless of which you choose, the future is unknown. Another choice is that if you believe (hope?) that the stock has stabilized and if it offers options, sell some OTM covered calls and receive some income while waiting. It will likely be a locked in loss but a smaller one. Again, no guarantees.
– Bob Baerker
4 hours ago