FNArena’s Weekly Insights – October 02 2023
In this week’s Weekly Insights:
-To Sell Or Not To Sell?
-Conviction Calls and Best Ideas
-FNArena Talks
By Rudi Filapek-Vandyck, Editor
To Sell Or Not To Sell?
When it comes to investing in the share market, very few events impact as much on the human psyche as a falling share price. In particular as it goes on and on and on.
As the old joke goes: investing in shares is really easy. You buy low and sell high. And if someone asks what do you do when the share price falls? You respond with: those shares should not be bought!
Life inside the share market is a lot different from the theory and the investment books, and there can be a whole suite in reasons as to why shares fall in price. Plus it can happen any time, including immediately after you bought in, and hit your favourite and biggest holding as well as that mistake you rather not think too much about.
Most investor responses can be identified through two opposites: one either does nothing and waits for the shares to recover back to the purchase price or we too sell our shares, don’t look back and move on.
Others might have downside protection in place such as automated stop-loss triggers or an ironclad, no exceptions rule such as sell from the moment the stock falls by -15% more than the market.
By far the most dangerous response is to simply buy more shares, and keep buying, until the average purchase price is exceeded by the share price that must, surely, start rising again at some point? Averaging down under such conditions might turn into a guaranteed route to bankruptcy as many have found out throughout the times.
