Money and Finance
We've all been there. You check your stocks in the morning, take a sip of coffee, only to find -- spppittt! -- one of your stocks is down big, real big.
At this point many questions begin to race through your mind -- What happened? Did I miss something? Should I sell? Should I buy? It feels like the clock is ticking and that you need to make a decision now.
These are the times that try patient investors' souls*, and they're important ones to manage properly. Knee-jerk reactions are rarely rewarded in the stock market.
So let's explore ways that we might become better at handling these situations. Here are seven steps that I've come up with over the years:
*Hat-tip to Mr. Paine
- A Fine Line Between Patience And Laziness
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- 3 Ways To Get Better At Selling Stocks
Show me somebody that has a stop-loss order of 10% below their purchase price, and I'll show you someone that's guaranteed to lose 10%. - Peter LynchIn many ways, selling a stock is a tougher decision than buying one. A quick look around Google,...
- A Simple Guide To Selling Stocks
Last weekend, a good friend came to town for a visit. We both started our financial careers on the same day -- and in the same training room, in fact -- but our career paths diverged a few years ago when he went the financial planning route and I went...
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Money and Finance
What to Do When a Sell-Off Strikes Your Stock
We've all been there. You check your stocks in the morning, take a sip of coffee, only to find -- spppittt! -- one of your stocks is down big, real big.
At this point many questions begin to race through your mind -- What happened? Did I miss something? Should I sell? Should I buy? It feels like the clock is ticking and that you need to make a decision now.
These are the times that try patient investors' souls*, and they're important ones to manage properly. Knee-jerk reactions are rarely rewarded in the stock market.
So let's explore ways that we might become better at handling these situations. Here are seven steps that I've come up with over the years:
- It's important to stay as calm as possible. Breathe and scan.
- Rather than read or watch news reports, which are typically sensationalized, go straight to the source. Read the company's press release and any associated presentation materials.
- After you've gathered the facts, develop your own take on the event.
- Revisit your original investment thesis, paying close attention to how the new information might impact the company's longer-term competitive position.
- Ask yourself, "Does this development fundamentally alter my thesis?" If so, consider selling and don't anchor into the price you originally paid for the stock.
- Consider buying more if your thesis remains intact, bearing in mind your current exposure to the investment and how the new share price compares with your fair value estimate.
- Remember that doing nothing is doing something. As such, know why you're deciding not to take an action.
What do you think? Have one to add to the list? Please post your thoughts in the comments section below.
Best,
Todd
@toddwenning on Twitter
*Hat-tip to Mr. Paine
- A Fine Line Between Patience And Laziness
"Perhaps the strongest feature in his character was prudence, never acting until every circumstance, every consideration was maturely weighed; refraining if he saw a doubt, but, when once decided, going through with his purpose, whatever obstacles opposed."...
- 3 Ways To Get Better At Selling Stocks
Show me somebody that has a stop-loss order of 10% below their purchase price, and I'll show you someone that's guaranteed to lose 10%. - Peter LynchIn many ways, selling a stock is a tougher decision than buying one. A quick look around Google,...
- A Simple Guide To Selling Stocks
Last weekend, a good friend came to town for a visit. We both started our financial careers on the same day -- and in the same training room, in fact -- but our career paths diverged a few years ago when he went the financial planning route and I went...
- Applying Investing Lessons From Three Great Books
After re-reading The Great Gatsby and finishing Franklin and Winston earlier this fall, I jumped into another round of investing books. The three investing books I happened to read in recent weeks have also been some of my favorites. Today I'd...
- 5 Questions To Ask Yourself Before Buying A Stock
1. What do I know about this stock that other investors don't? Every investor who has ever bought a stock believes it to be undervalued or under-appreciated by the market, but before you press the "buy" button it's absolutely critical to...