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What to do as price plunged on $100K investment?

Tuesday, July 10, 2018

Reader says...

I have $100K invested in XXX.

As the stock price has plunged, I am wondering if I should buy more, hold or sell?

Should I buy more or should I invest in another stock?

AK says...

Remember the importance of position sizing.

If your investment makes you worried, it might be because it is too big.

Don't bite off more than you can chew.

1. Always ask why did you invest and if it still makes sense now?

2. Ask if you did not invest back then, would you invest now?

Then, you will know what to do.

No matter how attractive an investment looks, it is rarely a good idea to throw in everything including the kitchen sink.

What? You don't know how to tell if you have thrown in the kitchen sink as well?

You would know because your home plumbing would keep you awake all night!

Related post:
Largest investments updated.


csky said...

Hi AK,

Do you have a certain fixed ratio for position sizing? For example, do you say set max $100K for a certain position and start nibbling at 10% that amount? And if price drop 10%, you nibble another 10%, so on and so forth?

Thank you!

AK71 said...

Hi csky,

I don't want to be prescriptive as everyone should come up with something they are comfortable with.

Certainly, what you have suggested could work for some people. ;)

I have provided an idea on how I do it before:

jojo said...

Hi AK,

"What? You don't know how to tell if you have thrown in the kitchen sink as well?"

I just have to put this in. Because of your comment above, my PC screen suddenly pops up with lotsa pics of ….. you guess right …. kitchen sinks!

aaaahhhh, Google, you have not disappointed me with your predictability! :) ;)

AK71 said...

Hi jojo,

Alamak. I hope this blog post has not given readers any terrible sinking feeling. ;p

haven11 said...

HAHA... thanks for the laughter at 10am.

AK71 said...

Hi Haven,

People sometimes get confused as to the purpose of ASSI.

Come to ASSI for education?

No lah.

Come to ASSI for entertainment. ;p

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