By How to turn a losing stocks portfolio into profits
In this article I’m going to explain how to overcome your fears and change your attitude so that losing becomes winning.
You could apply what I’m going to teach you in this article into many areas of your life. It would be your job, your relationships, your marriage, your goals, whatever.
The important thing to focus on is to invest your motivation into learning to deal with time.
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So let’s get right into it
You’ve done some research and invested some money into buying a number of stocks. Some go up a bit and then fall again. The rise wasn’t enough to tempt you to cash out by selling shares in those stocks, and so you hold on to them.
While you are waiting for one or hopefully most if not all of your stocks to go up so you can double your investment or more, something bad begins to happen.
Your stocks start to go down;
Not one stock, but most if not all of your stocks are losing value. You are losing money. Overall you’re -50% down. You wait a bit, a week passes, then 2 weeks, nothing happens. If anything your stocks portfolio sinks further.
You panic and fear;
is telling you to sell. Just sell everything, accept the loss and never touch another stock in your whole life.
If you listen to your fears you will see no bright skies of logic and all your hard research will be wasted.
I tell you now two things;
- You can’t always buy at the bottom. When you think you have bought value, that the stock price seems cheap and it’s all up from here, stocks can and do fall further. Stock price fall further for all kinds of reasons.
- Stock price do rise, and the ones you are losing on now, probably will rise if you give it time. And time is what the stock market game is all about. You had watched a stock price fall after you invested in it for weeks, months and maybe it stayed down for years.
But on the whole with most stocks, a time will come again where not only you will get your money back, but the stock price will rise more than what you had paid for it.
If you buy a stock and the price falls, unless you are a day trader and have set a stop loss and are going to take a hit because it forms part of your strategy, the best thing to do is to turn your trade into an investment and stake ride out the storm.
Let the stock do its thing
There’s no point getting all worked up about the stock price being lower than what you had paid for it. This is all part of the game. If you bought the stock or stocks when you believed they were cheap and worked out that those same stocks could rise a bit more or lot more than what you paid, then allow time to prove you right.
If you to be proved wrong ultimately then there are things you can do to mitigate any losses.
- Don’t invest too much money in one stock. You need to split up half of your cash investing bankroll into one half for buying stocks and the other half kept in cash ready to buy more of the same stocks if the prices fall significantly.
And to buy other stocks too. Never get upset because one or more of your stocks are losing money. You are only really losing money if you sell stocks at a loss.
- Claim the loss back on your tax returns. You can’t claim a loss if you should the stock at a loss because the stock price may end up rising. You can claim a loss if the company you investing in goes under, is liquidated or the shares are deemed as being worthless.
- Buy other stocks using more of your cash reserves. If the worst happened to one or more stocks, other stock buys could prove profitable. With one or more stock trades you could recover any losses and bring the value of your portfolio back to breakeven or even into profit.
And you will still own those bad performing stocks, so that if they go up in the future and you will make more profits.
If you get into the stock market investing game;
you need a source of income where you can continue to invest. Whether you are investing for the dividends or stock price value or both, you need to understand that you are entering into a process of investing that should never end.
Your goal is to grow the value of your portfolio
And you will not do that if you allow fear to dictate foolish decisions. Never sell a stock if you are losing money just because the fear make you want to do it.
No investor, not even the best of them;
buys all their stocks when the prices are low and the prices of those stocks don’t fall further after they have bought. It happens all the time. But what you must understand that being down is part of making money.
You have to take short-term pain to get your stocks investing portfolio to where you want it to be.
You need to eliminate fear from your mind
Look at the bigger picture. Let’s say you are worth $100,000 and have invested $20,000 into buying stocks, and your are down -50% so losing $10,000. You are losing but have not lost.
Not yet, not until you sell at a loss. So you need to resist the fear and hold on to your investment.
You are down $10,000 but are still worth $90,000 and have the ability to earn more funds over the years, from your job etc, while you are trying to grow the value of your stocks investment portfolio.
You own the shares so there’s no pressure on you selling merely because those stocks are down.
The stocks you invested will probably go back up;
and you will kick yourself if you sold at a loss. You will think it was all a game against you, that the stock prices dropped, to cause you to sell at a loss.
And once you sold then the prices rose. 8 times out of 10 they do end up rising.
The stock market, as a whole is a game and there are smaller games being played with individual stocks.
But once you understand this;
you can view the bigger picture and you will not see the state of being down, losing money as a loss, but as a process. This then will be how you change your attitude about investing.
The biggest short-term profits;
investing in stocks are made through less well established companies. It’s worth investing in some in case they turn out to be massive growth companies.
Look at a lot of now giant stocks;
and they were once low valued, and had ridiculously cheap share prices. And the stocks well further still. Stock that were under $1 and are now over $3,000 per share.
For me, I see in people that;
the biggest problem is not so much holding on to shares even they are down, but knowing how long to hold on to them when they are making money in profit.
Sell too early when the;
stock price is rising and in a way this is worse then selling at a loss when you should have held on. But that’s another article. Another time. Remember the stock market investing game is: buying in for value-fear–reason–time-selling at Value.
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