What should I do when I'm down 25%?

If you can't convince yourself "When I'm down 25%, I'm a buyer" and banish forever the fatal thought "When I'm down 25%, I'm a seller," then you'll never make a decent profit in stocks. (Page 246, One Up On Wall Street)

If we are holding stock of a good company and if the price should decline, the logical thing for us to do is to buy more since the stock has become cheaper, especially if there is a good margin of safety. 

Why sell?





Remember that Peter Lynch is all about FA and I have no doubt that TA practitioners will be able to explain why selling might be a good idea based on chart action. 

Peter Lynch doesn't believe in stop loss, by the way.

I think, as retail investors, we have to take the middle ground. 

We probably do not have the financial muscles of a fund manager like Peter Lynch and to do what he advocates, we must always have a war chest ready.





How to have a war chest ready? 

Well, we should save as much of our earned income as we could from employment, for a start. 

However, this could be painfully slow.

So, we have to be pragmatic and take some money off the table when prices run up significantly once in a while. 

We have to grow our war chests ourselves since we cannot get fresh funds from new unit holders like fund managers can. 

This way, we would be able to buy even more if prices were to plunge significantly for some strange reasons.





Obviously, there are always two sides to a coin. We could decide to sell and prices could go higher after we have sold. 

Prices could also go lower after we have bought more. Well, that is the way Mr. Market is.  

He doesn't care what we have done. He will do what he will do.

This is why many people focus their attention on asking what might be or could be happening in future. 

They try their best to guess what Mr. Market will do.





Indeed, questions in the form of "Will the price fall/rise in the next month/quarter/year?" are quite common in some quarters.

To me, the important thing to know is "What should I do?" given a certain set of circumstances. 

So, what should I do when I'm down 25%, for example?





Related posts:
1. How to be "One Up On Wall Street?"
2. A common piece of advice on saving.
3. When to BUY, HOLD or SELL?
4. Be prepared for war!
5. Risks and rewards: TA and FA.
6. Where did I go wrong?

Manchester United Football Club's Asian snack!

I went and bought one of my favourite snacks today and I found out that it is actually a Global Snack Partner of Manchester United Football Club's!

So, which snack is it? You might be amazed:

Really! No kidding. Then, I decided to check on the manufacturer which is based in Malaysia.

Unfortunately, it is a private company.

Oh, well, I tried. Time for a snack. Have a break, have a Mamee. Sedap!