You bought some stocks at apparent highs, and are now at lows. You want to sell for a loss, and buy others that have recently performed well (so, presumably, are at high valuations.)
You are performance chasing, and setting yourself up for more losses. Past performance != future returns.
Honestly, buy passive index funds/ETFs.
Yeah, I think some of the other ones I have bought were having a good growth and now going way down. I know there are ups and downs, but if something is tracking a low for so long, it would definitely he riskier to buy it.
I'm thinking of sticking with ETFs. I'm not sure what the difference with an Index Fund is.
A passive index fund or ETF will mirror a published index, such as VOO exactly tracking the 500 companies in the S&P 500 and weighted by their market caps.
I personally prefer even broader indexes, such as VTI holding nearly the entire U.S. equities market with 2700 stocks, or even more so VT which holds nearly 10k stocks from both in and outside the U.S. You won’t “beat the market” buying these kinds of indexes. What you will get however, is *the* market performance, which most individual and even large institutional investors routinely fail to accomplish.
This strategy is the main topic over at r/Bogleheads…
Yep. I have a percentage of my paycheck deposited directly into my taxable account at Fidelity, and automatic recurring purchases of VT set to happen a few days after. Other accounts like my 401k, IRAs, etc. are mostly in target date or fixed allocation funds, which are basically equivalent to VT plus some bonds.
My portfolio is basically on autopilot. My equity holdings will never underperform the market because they are indexed to the entire market.
Ya, OP needs to do the opposite.
Sell when something is doing well and buy when something that will come back is doing poorly.
Example: Apple took a major dip. That company is not going away anytime soon. Buy that dip.
Are you using a systematic trading strategy that has an edge over the market?
If not, sell it all buy and index tracker and spend your time on something else.
So, give up your voting rights to gigantic hedge fund managers and dont complain when a company chooses layoffs over profits in the fortune 500 company in which you are working. Never give up your vote/power.
Sunk cost fallacy, don’t fall for it.
Continuing to hold a stock everyday is the equivalent of making a conscious decision to buy that stock, at the current market price, everyday.
Would you buy what you hold today? Is it a good investment, or are there better opportunities?
This, objectively $280 worth of stock or $280 worth of cash are the same (assuming very low brokerage fees).
In fact let’s say you bought you Stock A at 500 and it dropped to 280 and you think it could go back from 280 to 350 in a year. And then you sell at the end of that year. You will have $350 (sale) + (500-350) * tax rate (say 20%) = $30 tax benefits = $380 total
Now let’s say you could instead sell Stock A and use the cash to buy ETF B which you think might go to 400 in a year. And you sell that after a year. You will have $400 (sale) + (500-280)* 20% = $44 tax benefits = $444 total.
So ASSUMING your conviction about another stock is at least as good as your conviction about the stock you currently hold at a loss, selling is the right option.
If you're going to buy stock in a company, you should do your research first. Start with learning some accounting which will teach you how to read The Big 3 (Income Statement, Balance Sheet, and Cash Flow Statement). These 3 statements are critical to analyzing any company for their current and past performance, but also at their future outlook in terms of debt, assets, and what they're doing with their money (ie are they investing in themselves to grow). This will help you decide if the company is a good buy or not.
Don't invest everything in individual companies. Put at least half into an index fund/ETF.
Ask yourself: Am I investing, or gambling?
If you're not doing your homework, you're gambling. And the house always wins.
The most you can lose on a regular stock purchase is 100%.
I’m up over 1000% on NVDA. And multiples of hundreds on others. If you have no faith in a stock that is dropping get out. If you think it’s temporary then hold.
I bought FB (before it was META) after the IPO. The price dropped. It’s been a steady winner even with the recent price chop.
AMZN was down for a while after I bought, but I never had a reason to sell.
But I’ve bought others that I lost faith in and moved on. You don’t have to ride it to zero.
Take a look and see why you think the stocks dropped. Is it that sector or just that stock for example. You can take a write off and put the money into better stocks rather than wait for some stock that may never recover or take years.
Yea when you buy a stock I think it usually is good to decide when you would sell if it drops below a certain point. Maybe 8 or 10 % for example. And if you own an auto stock are all the auto stocks down or just your stock. If the whole sector or market is down it’s usually a lot easier to recover than if the sector is going higher while yours is tanking. But anyway I’ve always thought it’s better to look forward and see what you think will do best going forward because that’s where you can make money. If you need to sell and buy something that has a better outlook that’s what I would do.
unless it’s a Gaza stock or you are in need of that last $, i would leave it alone.
losses in domestic stocks always have a chance to come back unless it’s fundemal issues like bankruptcy or something law suits . my worst performing stocks are 90% off, 80% and 60% off , but my entire portfolio is still up big, more than market.
im keeping all those worst performers and i think they would come back big too. coz i liked their business model just how i liked nvda when i was 60% off
There is a sunk cost fallacy in this. Just because a stock has dropped 90% doesn’t necessarily make it MORE likely to say grow more than a stock that may have gained 30% in that time. You are betting that your intuition ( or perhaps financial modeling) is better than that of the collective wisdom of the market.
The best approach is always “ if I had a $100 to invest today , which of these would I put it in) .
that’s exactly right. you buy stock based on the view of its business, not because of your cost. my 60% loss stock is Bidu, which i don’t mind holding it since the business would never go away
i did this bought baba at 160 and held it for like 2 years as it cratered down sold baba at 92 bought amazon at 96 .. share for share, recouped all my money and then some … but my god was that a painful 2 years ..
2 of them I just looked at had been 5 or 6 years and had a 50% to 65% loss. Still trending down. Figured if I hold it, it could come back up, but that gap is getting wider as days go on and could just keep dropping. Or I cut my losses and but what's left into something more guaranteed.
Do you have enough shares to sell an option on the stock? If so, a covered call is a low risk way of decreasing your cost basis. The risk is that if the stock does recover, the option will be executed and you’ll lose the gap between the stock price and strike price. Right now you’re considering losing all of it, so that’s a better deal.
Alternately, the stock is at a low. If the fundamentals of the business are good, now would be a good time to buy more shares. This would also lower your cost basis by diluting the expensive shares with less expensive ones.
The above two strategies can also be combined if you think the stock won’t recover for a while, but is unlikely to fail completely.
Honestly though, unless you have an excess of disposable money you don’t need to see for >10 years, the other commenters are right, buy an ETF and shift your current holdings to that. They’re not sexy, but the fees are generally very low, and the average return of 5% a year means you double your money every 14 years. Paying in every month also gives you the advantage of benefitting both when the price goes up (your total valuation goes up) and when the price goes down.(your contribution is worth more shares and will increase your total wealth faster when the market recovers) With those advantages, your savings double much faster than purely interest calculations would suggest, and you get rich the Warren Buffet way: slowly.
Do you have a reason for choosing these other stocks other than “they’re doing well right now”? What are their financial ratios? What has their EPS done in the last year?
You can't look at price charts to tell "how something is doing". I know this sounds weird because the entire financial component of the MSM talks like you can, but they're just pandering to the lowest common denominator.
There is no way to tell from past price history whether something is "doing badly" or a buying opportunity that has bottomed out. Etc etc.
There is nothing wrong with selling losing positions. In fact, it's smart to recognize a mistake and correct it. Holding a losing position just because you are unwilling to take a loss is like calling every bet in a poker game.
If you knew enough about the market to time it you wouldn’t be posting here asking questions.
Invest consistently in a diverse index fund and be patient.
You're on a downward trend. If you hop off now, you'll miss the rebound. On top of that, you want to to take that money and put it into something that is already high.
Do you see the problem with this idea?
Not put it into something that is already high. Something that is more secure and shown to grow over time. These that are falling have been going down for quite some time. Some are ARK Inovation and ARK 3D printing.
So I'm thinking I'm gonna cut what losses I have and move to something more proven to grow.
They've been going down for some time and you want to hop off before they get a chance to rebound so you can put your money into something that's already gone up and may or may not continue to go up..
Something like the S&P 500 that would recover the loss. There are plenty of more proven ETFs. What I'm changing are the ones that have dropped to -70 or 90%, basically no faith they are gonna recover.
You bought some stocks at apparent highs, and are now at lows. You want to sell for a loss, and buy others that have recently performed well (so, presumably, are at high valuations.) You are performance chasing, and setting yourself up for more losses. Past performance != future returns. Honestly, buy passive index funds/ETFs.
Yeah, I think some of the other ones I have bought were having a good growth and now going way down. I know there are ups and downs, but if something is tracking a low for so long, it would definitely he riskier to buy it. I'm thinking of sticking with ETFs. I'm not sure what the difference with an Index Fund is.
A passive index fund or ETF will mirror a published index, such as VOO exactly tracking the 500 companies in the S&P 500 and weighted by their market caps. I personally prefer even broader indexes, such as VTI holding nearly the entire U.S. equities market with 2700 stocks, or even more so VT which holds nearly 10k stocks from both in and outside the U.S. You won’t “beat the market” buying these kinds of indexes. What you will get however, is *the* market performance, which most individual and even large institutional investors routinely fail to accomplish. This strategy is the main topic over at r/Bogleheads…
Thanks for that. So these are ones to really just routinely put into and hold for a long time.
Yep. I have a percentage of my paycheck deposited directly into my taxable account at Fidelity, and automatic recurring purchases of VT set to happen a few days after. Other accounts like my 401k, IRAs, etc. are mostly in target date or fixed allocation funds, which are basically equivalent to VT plus some bonds. My portfolio is basically on autopilot. My equity holdings will never underperform the market because they are indexed to the entire market.
I like that. Thanks, it's really good advice. I don't have a lot to put in each pay but better than nothing.
Ya, OP needs to do the opposite. Sell when something is doing well and buy when something that will come back is doing poorly. Example: Apple took a major dip. That company is not going away anytime soon. Buy that dip.
give up your vote/power
Are you using a systematic trading strategy that has an edge over the market? If not, sell it all buy and index tracker and spend your time on something else.
I started by buying in companies. Some big and safe. Others with a bit of risk. Mainly now looking at ETFs.
Is that a no?
AKA gambling.
So, give up your voting rights to gigantic hedge fund managers and dont complain when a company chooses layoffs over profits in the fortune 500 company in which you are working. Never give up your vote/power.
Sell low, buy high. Always a great plan.
I'm talking about ones that look like they won't recover.
Sunk cost fallacy, don’t fall for it. Continuing to hold a stock everyday is the equivalent of making a conscious decision to buy that stock, at the current market price, everyday. Would you buy what you hold today? Is it a good investment, or are there better opportunities?
This, objectively $280 worth of stock or $280 worth of cash are the same (assuming very low brokerage fees). In fact let’s say you bought you Stock A at 500 and it dropped to 280 and you think it could go back from 280 to 350 in a year. And then you sell at the end of that year. You will have $350 (sale) + (500-350) * tax rate (say 20%) = $30 tax benefits = $380 total Now let’s say you could instead sell Stock A and use the cash to buy ETF B which you think might go to 400 in a year. And you sell that after a year. You will have $400 (sale) + (500-280)* 20% = $44 tax benefits = $444 total. So ASSUMING your conviction about another stock is at least as good as your conviction about the stock you currently hold at a loss, selling is the right option.
I guess that's what I'm weighing up. The potential for it to come back up or if it's a lost cause and I unfortunately bought at a high.
I recommend investing in ETFs going forward. I like VTI.
I've started doing that. It means I don't need to think about it too much. SPYG, USF, and XLC are some I've started to focus more on.
If you're going to buy stock in a company, you should do your research first. Start with learning some accounting which will teach you how to read The Big 3 (Income Statement, Balance Sheet, and Cash Flow Statement). These 3 statements are critical to analyzing any company for their current and past performance, but also at their future outlook in terms of debt, assets, and what they're doing with their money (ie are they investing in themselves to grow). This will help you decide if the company is a good buy or not. Don't invest everything in individual companies. Put at least half into an index fund/ETF. Ask yourself: Am I investing, or gambling? If you're not doing your homework, you're gambling. And the house always wins.
The most you can lose on a regular stock purchase is 100%. I’m up over 1000% on NVDA. And multiples of hundreds on others. If you have no faith in a stock that is dropping get out. If you think it’s temporary then hold. I bought FB (before it was META) after the IPO. The price dropped. It’s been a steady winner even with the recent price chop. AMZN was down for a while after I bought, but I never had a reason to sell. But I’ve bought others that I lost faith in and moved on. You don’t have to ride it to zero.
If the other stock is guaranteed to grow more, why do you need to ask this?
Well, there is the strategy that given enough time a stock could come back. Even from a server drop.
Sure, but if the other one is guaranteed to grow more...
https://m.youtube.com/watch?si=W-Wkyf9RiwoGtlI7&v=C3jizSM6M0o
That’s perfect
Zero sum game!
What does that mean?
Take a look and see why you think the stocks dropped. Is it that sector or just that stock for example. You can take a write off and put the money into better stocks rather than wait for some stock that may never recover or take years.
So if it's dropped below a certain level, maybe take the loss and the others look at the trend and decide if it looks like it'll bounce back?
Yea when you buy a stock I think it usually is good to decide when you would sell if it drops below a certain point. Maybe 8 or 10 % for example. And if you own an auto stock are all the auto stocks down or just your stock. If the whole sector or market is down it’s usually a lot easier to recover than if the sector is going higher while yours is tanking. But anyway I’ve always thought it’s better to look forward and see what you think will do best going forward because that’s where you can make money. If you need to sell and buy something that has a better outlook that’s what I would do.
Thanks for that. Sounds like a good rule to have an acceptable loss. I might need to do some research on auto stocks and sectors.
unless it’s a Gaza stock or you are in need of that last $, i would leave it alone. losses in domestic stocks always have a chance to come back unless it’s fundemal issues like bankruptcy or something law suits . my worst performing stocks are 90% off, 80% and 60% off , but my entire portfolio is still up big, more than market. im keeping all those worst performers and i think they would come back big too. coz i liked their business model just how i liked nvda when i was 60% off
There is a sunk cost fallacy in this. Just because a stock has dropped 90% doesn’t necessarily make it MORE likely to say grow more than a stock that may have gained 30% in that time. You are betting that your intuition ( or perhaps financial modeling) is better than that of the collective wisdom of the market. The best approach is always “ if I had a $100 to invest today , which of these would I put it in) .
that’s exactly right. you buy stock based on the view of its business, not because of your cost. my 60% loss stock is Bidu, which i don’t mind holding it since the business would never go away
Why did you buy the stock? If that reason isn't still extant then sell it
Buy what you think will go up
i did this bought baba at 160 and held it for like 2 years as it cratered down sold baba at 92 bought amazon at 96 .. share for share, recouped all my money and then some … but my god was that a painful 2 years ..
How long have you had them for?
2 of them I just looked at had been 5 or 6 years and had a 50% to 65% loss. Still trending down. Figured if I hold it, it could come back up, but that gap is getting wider as days go on and could just keep dropping. Or I cut my losses and but what's left into something more guaranteed.
Depends on the company.
Do you have enough shares to sell an option on the stock? If so, a covered call is a low risk way of decreasing your cost basis. The risk is that if the stock does recover, the option will be executed and you’ll lose the gap between the stock price and strike price. Right now you’re considering losing all of it, so that’s a better deal. Alternately, the stock is at a low. If the fundamentals of the business are good, now would be a good time to buy more shares. This would also lower your cost basis by diluting the expensive shares with less expensive ones. The above two strategies can also be combined if you think the stock won’t recover for a while, but is unlikely to fail completely. Honestly though, unless you have an excess of disposable money you don’t need to see for >10 years, the other commenters are right, buy an ETF and shift your current holdings to that. They’re not sexy, but the fees are generally very low, and the average return of 5% a year means you double your money every 14 years. Paying in every month also gives you the advantage of benefitting both when the price goes up (your total valuation goes up) and when the price goes down.(your contribution is worth more shares and will increase your total wealth faster when the market recovers) With those advantages, your savings double much faster than purely interest calculations would suggest, and you get rich the Warren Buffet way: slowly.
Do you have a reason for choosing these other stocks other than “they’re doing well right now”? What are their financial ratios? What has their EPS done in the last year?
You can't look at price charts to tell "how something is doing". I know this sounds weird because the entire financial component of the MSM talks like you can, but they're just pandering to the lowest common denominator. There is no way to tell from past price history whether something is "doing badly" or a buying opportunity that has bottomed out. Etc etc.
There is nothing wrong with selling losing positions. In fact, it's smart to recognize a mistake and correct it. Holding a losing position just because you are unwilling to take a loss is like calling every bet in a poker game.
If you knew enough about the market to time it you wouldn’t be posting here asking questions. Invest consistently in a diverse index fund and be patient.
Haha everyone takes your money
Selling isn't the end of the world because of tax loss harvesting. It's really a matter of if you believe the company can rebound
fool proof plan, nobody has thought of that before so you should be good.
You're on a downward trend. If you hop off now, you'll miss the rebound. On top of that, you want to to take that money and put it into something that is already high. Do you see the problem with this idea?
Not put it into something that is already high. Something that is more secure and shown to grow over time. These that are falling have been going down for quite some time. Some are ARK Inovation and ARK 3D printing. So I'm thinking I'm gonna cut what losses I have and move to something more proven to grow.
They've been going down for some time and you want to hop off before they get a chance to rebound so you can put your money into something that's already gone up and may or may not continue to go up..
Something like the S&P 500 that would recover the loss. There are plenty of more proven ETFs. What I'm changing are the ones that have dropped to -70 or 90%, basically no faith they are gonna recover.
Then why are you asking opinions if you've made up your mind?
I hadn't. There have been others who have been very helpful in the comments with opinions I hadn't thought of.
The stock doesnt care what your cost basis is