The problem with purchasing shares in a company (Jason Hartman recommends real estate as a safer and more profitable investment) is that companies lose market value, which means your investments lose money. Sadly, many of these companies never make a profit again, or make a profit that is (at best) average. In order to sell shares at a gain, companies need to be profitable and experiencing growth.
Sometimes this takes years, and sometimes it doesn’t happen at all.
If this sounds familiar and is happening to your own financial portfolio, you’re probably wondering if you should sell your sad stocks—or hold on to the hope that they’ll turn around. There are a few questions you can ask to guide you along your way.
It is important to establish the current financial and market position condition of the company. Decide if your investment is actually bad or if it is just experiencing a temporary setback or problem unrelated to the overall business performance. How likely is the company to return to profitability? You may be able to get a better handle on this by inquiring with management or researching plans and policies for the future. If you trust management and their view going forward, it may be an investment worth keeping. It’s also important to identify what caused the initial decline of the stock price in the beginning.
Go back to the time you first purchased the stock—was the purchase price higher than the intrinsic value? Is the company still one you believe in? Does this particular investment still fit into your investment plan and strategies going forward?
If you’re leaning toward selling, consider the return from holding versus the return from selling—is it worth a loss? Maybe. Think about your plans for the money-what new investments might it give way to? Would this new investment help accomplish your financial goals?
If you can answer these questions, you’ll probably find that your answer is right in front of you. Often, selling at a loss is ultimately the right decision.
It has been said that you don’t need to make money back the same way you lose it. For your investments, this is especially true. Put your money in sound investments within your control, and you won’t be forced to make a decision that will decrease your wealth. Put your money to work by making sound investment choices based on logic, personal investment philosophy, and expert advice. (photo credit: David Paul Ohmer via photopin cc)