Business Learning Centre

Values in fall. To sell or hold?

In this article we will deal with the psychological part of stock market investment. Usually occurs when away from the technical analysis of an action, we have invested in a value and this does not react as expected at the time of purchase. At this point a question arises that is … sell or keeps the action?

Given this case, investors can only act in three ways and we cannot say that a decision to be more successful than the other.

If we invest in an action that begins to lower its value, we can only act in the following ways:

1. Sell quickly

In this case, the manager is fear. We know that before a value is declining, to keep losses could become more and more knowing that it would suffer the same fear of other investors, which also decide to sell their shares causing a greater fall in value.

2. Maintaining the value

In this case, we use patience. We know that the bag is in constant motion and that an action can lower its value but in a few weeks, months or years can re-stabilize. In other cases, an investor tends to hold the value for the simple pride of not recognizing a loss, no loss of money until you do the actual sale of stock at a loss.

3. Maintain and acquire new shares

Other investors, far from worrying about the fact that a value is down, what they do is buy new shares at a price even lower than when purchased. In this way, and trusting that the value back to your site, not only will have had losses but their profits have increased considerably. Perhaps the factor that occurs in this case is the ambition (not bad).

But which of these three strategies is appropriate?

As we stated earlier, none of these three strategies is right or wrong, and that depending on what value we should apply one or another.

To apply the correct investment strategy we analyze the value, the reason for the decline of the shares (is the only stock market in general or this company), and future plans have the company’s expansion projects and new strategic partnerships.

We calculate the time we anticipate that the value will take to climb, as being too long, it may be better to sell the shares at a loss but still have not stuck your capital.

On the other hand, we must examine whether we offset the payment of dividends during this time that the value will be stalled.

However, it may be a point in time that produces the fall in value or may be imminent announcement of a serious problem in the company that could lead to bankruptcy. Analyzed these two points in the first case, the ideal strategy would be number 3 and the second case, without any doubt the number 1.

Today, I recognize that the investment strategy that has given me more result has been the number 3, call it luck, and blinded by pride, I have sometimes refused to sell at a loss.

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