When Is It Okay To Sell A Losing Stock

Trying to time the best time to sell a stock that is losing you money is extremely stupid, and in this video I’ll tell you why. It’s a short because its not that complicated, but its hard to take action.

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Falling Knife Theory

Lets say you bought a stock and it was about $100 per share, and that stock goes down to $50 per share or 50%

For that same stock to go back up to $100, it has to increase by 100%

That’s how crazy it can it

The question is always: how low can it go

The answer is, a stock can go all the way to $0

You can lose all your money

And the bad thing, that in the stock market, the tool for building wealth is money, so money, you cant make money

The problem with trying to catch a falling knife

I bought gpro when it was at $30 something dollars

For the simple reason that at the time it was low and I thought it would go up to its original price ( very stupid way of thinking about stocks by the way )

Gopro stock is not worth about $4 per share

The best time to sell: is when the foundamentals of the business change, more on that later

Intrinsic Value of a Stock

That’s basically what the stock is worth in dollars today based on how much money you can get out of the company from today, till the day the company goes out of business and compared to other investments available

Meaning if buy a chicken and that chicken can make me 1 egg a year for 10 years

And I cans ell each egg for $10, I know this chicken cannot be worth more than $100

But even worst:

I know that even $100 is not a fair price

Because I need a margin of safety

And I also need to account for the money I’m givign up in the future ( net pressent value )

So once you run all the numbers

You;ll know how much the chicken is worth

So if the stock market says its worth $1 but the chicken is still healty, and everthing is fine

It’s a perfect time to buy more shares

However if the chicken is ill, the farmer is dying, and the business is being replaced by powdered eggs, then it may be a good ideas to sell

The foundamentles have changed

So when do I sell

If you don’t know the value of what you have ( sell )

If the fundamentals change and the company is lossing value ( sell )

But that’s about it

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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